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National Restaurant Association - Economist’s Notebook: Restaurant industry’s labor challenges are likely to reemerge in the years ahe

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Economist’s Notebook: Restaurant industry’s labor challenges are likely to reemerge in the years ahead

In his latest commentary, the National Restaurant Association's Chief Economist Bruce Grindy discusses trends in the restaurant industry’s labor pool.  While finding employees isn’t a widespread problem for restaurant operators today, it will likely reemerge as a challenge in the years ahead when the economy returns to full strength.   

In the current business environment, a labor shortage isn’t top of mind for most restaurant operators.  Amid soaring food and energy costs and an elevated unemployment rate, recruiting-and-retaining employees typically isn’t the most pressing operational issue these days. 

Indeed, only four percent of respondents to the National Restaurant Association’s April 2011 Restaurant Industry Tracking Survey said recruiting-and-retaining employees is the top challenge currently facing their business, well below those who said food costs (26%), the economy (24%), building-and-maintaining sales volume (13%) or gas prices (9%).  Flash back four years, and the story was quite different, with 33 percent of restaurant operators identifying recruiting-and-retaining employees as their top operational challenge.

Although finding employees isn’t a widespread problem today, it will likely grow increasingly difficult as the economy continues to improve and the labor market tightens.  And the question will once again become where to find employees, particularly if the recent trends in labor force participation don’t turn around. 

Between 2000 and 2010, the labor force participation rate among 16-to-19 year olds plunged from 52 percent to 35 percent – the lowest level on record.  While the drop was not as precipitous among 20-to-24 year olds, their labor force participation rate also declined over the last 10 years, from 78 percent in 2000 to 71 percent in 2010.  As a result, there were 1.6 million fewer 16-to-24 year olds in the labor force in 2010 than there were 10 years earlier, a development that cut into the restaurant industry’s prime labor pool. 

Labor Force Participation Rate: 16-to-19 Year Olds

(Source: Bureau of Labor Statistics)

Labor Force Part Rate.gif

While labor force participation among 16-to-24 year olds is expected to improve somewhat as more jobs become available, it will likely not get back to 2000 levels any time soon.  In contrast, the labor force participation rate among adults aged 55-and-older rose from 32 percent in 2000 to 40 percent in 2010, an upward trend that is expected to continue well into the future. 

These labor force trends are already impacting the distribution of the restaurant industry’s workforce.  In 2010, 16-to-24 year olds worked in 38 percent of foodservice jobs, down from 42 percent in 2000.  During the same 10-year period, the proportion of foodservice jobs held by adults aged 55-and-older rose from eight percent to nearly 10 percent. 

Looking forward, the National Restaurant Association projects total restaurant and foodservice employment to grow 11 percent in the next 10 years, while the 16-to-24 year old labor force is only expected to grow four percent.  As a result, now is a good time for restaurant operators to focus on expanding their business’ labor pool, so they will be ahead of the curve when the economy recovers and the pool becomes shallower.   

Projected Growth in Labor Indicators: 2011 to 2021

(Source: National Restaurant Association)

Projected Labor Indicators.gif 
For additional analysis of restaurant industry trends, log on to Restaurant TrendMapper. (subscription required).

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