Bob Novello has been searching for workers for months. He will need about 60 to staff the Rancho Mirage location of Enzo’s Bistro and Bar. To date, he has found none.
“I should know in the next two weeks if we’re going to make it or not,” Novello said. “(I’ll know) whether we’ve hired some people and if we can hire some people I think we’re on our way to getting open.”
The restaurant, which has been closed since the onset of the pandemic, was set to reopen in November. Instead, a staffing shortage has left it idle. The only sign of life many days is a bright-red “Now Hiring” sign wrapped around the restaurant’s Highway 111 marquee sign.
Many Coachella Valley businesses like Enzo’s are hurting for workers, driving shorter hours, operational changes and temporary store closures. The problem is most acutely felt in the hospitality sector, which business owners and experts say faced a significant — and possibly permanent — exodus of workers under the pandemic.
Many local businesses have been experiencing the worker-shortage issues for nearly a year, raising questions about the long-term impact on the Coachella Valley’s hospitality-driven economy. Some say the situation could drive faster automation to compensate for the lack of workers, while others say it could lead to an economic consolidation as smaller independent businesses are forced to close and are replaced by larger rivals.
The situation has driven up pay for service workers across the valley, as employers compete in what some dub a “bidding war” for available staff.
For small businesses on tight margins, unable to fully compete on price, one ray of hope could lie in emerging evidence around the value of qualitative benefits. Businesses that can provide stability and a positive work environment, recent studies and the experiences of some local businesses suggest, are less likely to end up facing frustrated customers with no one to serve them.
Still desperate for workers
Local hospitality businesses have been struggling with the worker shortage issue for most of the last year.
While some workers appear to have gradually returned to the sector since early 2021, state employment data suggests hospitality jobs are still down significantly relative to pre-pandemic levels. There were 335,200 fewer hospitality workers in California in November than in February 2020, a 16% drop, according to the U.S. Bureau of Labor Statistics.
While that is a marked improvement from earlier points in the pandemic, the experiences of many local businesses suggests these remaining missing workers could be gone for good.
“It’s not gotten any better at all,” Steven Boswell, manager of Hotel Zoso and Palm Mountain Resort and Spa in Palm Springs, said of the worker shortage.
“We’ve taken measures such as increasing salaries; we’ve increased our advertising through all of the available apps that are out there,” Boswell said. “We’re just not having any luck whatsoever.”
The hotel manager said despite raising wages for positions such as front-desk workers from $15 an hour before the pandemic to just under $19 today, those and roles such as valets and housekeeping are all chronically understaffed.
“We’ve had to take rooms out of order just because we couldn’t (clean and prepare) them fast enough,” Boswell said, “especially on the weekends and (during) special events and on holidays.”
Iryna Pyle, owner of Haus of Pizza in Palm Desert, said despite raising wages multiple times, she had to cut her restaurant’s hours from 11 a.m. to 9 p.m. down to 3 to 8 p.m. due to a lack of workers.
“I’m offering $18 per hour and still no applications,” Pyle said. “Two weeks ago I spent $360 on Facebook ads. I had only 20 applications. Fifteen out of 20 had no experience in restaurants. Five of them had experience and I invited them to come into Haus of Pizza and nobody showed up.”
Pyle eventually got so fed up with the situation that she decided to “hire” a robot.
After reading about a restaurant in Florida that used a serving robot, Pyle spent several months deliberating and doing online research before deciding to lease a similar machine for her own business. She now pays $429 per month for “Robot Rosi,” a robot that replaces two workers ferrying food between the kitchen and customers’ tables.
“When the food is ready, I just push the table number — for example table three — and it delivers food to table three,” Pyle explained. “Customers serve themselves and then the robot comes back.”
She added that sensors and radar enable the robot to navigate unexpected obstacles effectively. It even self-sanitizes the shelves where staff and customers place food.
Pyle said she has been very satisfied with Rosi’s performance over the last two months. Most customers — especially children — love the robot, and many want to take pictures or videos of it.
“It’s way cheaper than hiring someone,” she said. “The robot never got sick; there are no family issues; there is no overtime. (A) robot is the perfect solution for me.”
Pyle said she thinks it is likely that, if the worker shortage continues, more local restaurants will begin employing robots similar to hers. She is even eying getting a second robot — a $3,000-per-month machine that makes pizza.
“Maybe that’s my next step,” she said.
Are they gone for good?
Many hospitality business leaders say they believe the workers who haven’t returned by this point likely don’t intend to.
“Some people just moved on as part of the ‘reevaluating your life’ situation (that is going on in the labor market),” said Jerry Keller, owner of Lulu’s California Bistro in Palm Springs and Acqua California Bistro in Rancho Mirage. The restaurant owner said he has been experiencing staffing issues for the last year and doesn’t expect any improvements in the near future.
Why exactly this shift is happening now is a matter of some debate.
Last year, many — particularly business owners — blamed the increased unemployment payments from the federal government for employees’ lack of interest in returning to work.
When the worker shortage began impacting local businesses early last year, Californians could collect up to $750 a week in unemployment compensation through a combination of state and federal benefits.
Most of those federal benefits ended in September, however, dropping the maximum unemployment payments for Californians to $450 per week.
While the prior benefits left unemployed Californians taking home significantly more than they could have working 40 hours per week at a minimum wage job, the current benefits put unemployment compensation back below state minimum wage levels for a standard work week.
Despite this, the reduced benefits haven’t led to a flood of unemployed workers reentering the labor pool.
“It was a reasonable thing for business owners to be worried about, but when we looked at the data it just didn’t seem to be true,” said Emily Nix, a USC researcher who studies labor economics.
Total nonfarm California employment ticked up only 1% in the months following the enhanced unemployment benefits’ expiration in September, according to the Bureau of Labor Statistics. While any improvement is positive, that growth doesn’t reflect any meaningful change to the trajectory California’s employment numbers were on for most of 2021.
Instead, Nix said a complex mix of factors including COVID-related heath concerns, a general reevaluation of workers’ priorities and increased competition for workers from large corporations have all played into the ongoing labor shortage.
“A lot of people have very valid health concerns,” said Nix. “That’s somewhat mitigated by the vaccine, but if you have a (child) under five that you can’t vaccinate then you might have concerns about being in a very service facing job where you’re potentially going to bring COVID back to your kids or to your elderly parents.”
Official employment data doesn’t yet reflect that impact of the COVID omicron variant, but Nix said that virus’ ability to infect fully vaccinated individuals could also be deterring some workers with health concerns from reentering service jobs.
The labor researcher said there was also evidence that many workers have been reevaluating work and the trajectory their careers were on since the start of the pandemic.
“We had that massive drop in employment at the beginning of the pandemic and some people weren’t working,” Nix said. “Maybe you say, ‘Oh my job is actually not great. It’s dead end. Let me see if I can find a better job.'”
“When you’re in the grind it can be hard to reevaluate in that way, and I think during the pandemic some people did,” she added.
Some hospitality business leaders credit the enhanced unemployment benefits for enabling this work reevaluation to happen, indirectly causing the worker shortage.
“(The benefits) kept people home from working because they were getting the money and it allowed them to rethink what their careers were and what they were doing,” Novello of Enzo’s said. “And unfortunately, our industry, the restaurant industry, is a very tough industry.”
Novello said he believes people who were “on the fence” about being in the service sector and might have otherwise remained decided instead that they wanted to pursue less demanding work.
That type of detailed causality is difficult, if not impossible, to verify, but Nix said it was possible that the enhanced unemployment benefits contributed to peoples’ ability to rethink their careers and, indirectly, to an exodus from some industries.
Another possible contributing factor to the worker shortage is increasing competition from big businesses, according to Nix. She raised the example of ecommerce titan Amazon, which increased its global workforce by nearly 75% over the course of the pandemic, adding nearly 630,000 employees in the period from March 2020 through September 2021.
That company’s average starting wage is over $18 an hour and it offers a slew of benefits such as fully-funded college tuition, healthcare coverage and up to 20 weeks of paid parental leave.
“If you’re a restaurant or other hospitality (business) in Palm Springs, you just maybe can’t compete against the wages (and benefits) these bigger firms can offer,” Nix said.
Some local businesses said they had observed this phenomenon at work over the last year.
Boswell of Hotel Zoso and Palm Mountain Resort said he has seen numerous employees leave for industries such as cannabis and warehouse work, including several who left for employment at the new Amazon last-mile delivery facility in Cathedral City.
Novello of Enzo’s compared the choice faced by many workers deciding between jobs with major corporations and local restaurants to the experience of browsing a fine china shop.
“Are you going to pick the broken china, or are you going to go for, you know, the good stuff?” Novello said.
Positive environment = willing workers?
One silver lining for small businesses unable to compete for workers on salary and benefits alone could lie in qualitative benefits. Some recent studies on workers’ motivations for leaving their jobs suggests a positive work environment and stability can play significant roles in employee retention.
A study published this month by MIT found toxic corporate cultures were the No. 1 factor that drove workers out of their jobs in the last year. Having bad company culture was over 10 times as likely to make someone quit than pay-related factors, according to the study.
The study also found that job insecurity was the second-largest factor driving people to leave their jobs. Pay-related reasons didn’t even make the top 10.
The experiences of some local businesses seem to support those findings, especially those related to stability.
Patrick Service, owner of Las Casuelas Terraza in Palm Springs, said he hasn’t faced much of an issue with staffing at his restaurant. He attributed much of the success to an emphasis on keeping nearly all of business’ staff both employed and in a good mental state throughout the pandemic.
“We really made an effort not to overwork everybody,” Service said.
Service said the business also doesn’t seasonally lay off workers during the slow summer months, leaving it with a more consistent staff than more cyclical businesses.
Enzo’s La Quinta location, which didn’t close during the pandemic and — unlike the Rancho Mirage location — is open summers, has faced few staffing issues, according to Novello.
That, Novello said, is despite several instances of attempted poaching by other restaurants. He recalled multiple instances of other restaurant management coming to Enzo’s La Quinta location and attempting to convince staff to leave.
“That’s a direct result (of the worker shortage),” Novello said. “We’re all vying for the same employee.”
While he noted his company has always treated employees respectfully, Novello said the worker shortage had increased the urgency of creating a positive working environment.
“I would give orders (to managers) and say, ‘When speaking to employees, you need to listen very carefully,” Novello said, “and listen to what they are saying and make sure they are treated with care.'”
Fewer small businesses, more robots?
The long-term effects of the worker shortage are still unclear.
USC’s Nix said it’s possible some workers will reenter the service industry after a stint at places like Amazon. That company is known for having a relatively high turnover rate among staff, potentially giving other businesses the chance to win back their workers — especially if they can offer a better experience for workers.
“The question is, can you offer a better working environment than the Amazons of the world?” Nix said. “For some small businesses, that answer could very well be yes. Because maybe you treat your employees better than these big businesses do; you have a more personal relationship with them.”
She noted businesses would still have to be competitive with large companies on wages in order to draw workers back.
If smaller businesses are unable to bring workers back and end up shutting down, Nix said that could consolidate market power in the hands of larger chain businesses and have a range of negative implications for the local economy.
“First, you have less diversity of goods and services, and that’s bad for consumers,” Nix said. “Second, when firms get big market power, they take advantage of that market power by raising prices on consumers potentially.”
“They can do all sorts of things that you can’t do in a very competitive environment where you have to offer great benefits to your workers to keep them because they’re able to move to other jobs easily and your customers can easily find substitutes,” she added.
Joe Wallace, CEO of the Coachella Valley Economic Partnership, said the worker shortage is likely to accelerate automation of low-skilled jobs. He called Haus of Pizza’s serving robot “a sign of things to come” and said it could spark other local businesses to try a similar approach.
“They’ll go (into Haus of Pizza) and they’ll see that and they’ll talk to (Pyle) and they’ll do the exact same thing,” Wallace said.
Nix said the speed at which jobs were automated would depend largely on business owners’ beliefs about the permanence of the worker shortage. If they believe it is likely to be this way for years to come, she said, they will be more likely to invest in automation.
“If wages continue to rise and rise, it’s going to be inevitable that you switch to machines,” Nix said.
She noted new businesses were more likely to automate roles than existing ones, meaning business turnover and new business growth could also play a role in accelerating automation.
“For example, if you have new restaurants opening up and they’re like ‘It’s been six months of really high wages,'” she said. “‘I can either do all the fixed costs of hiring someone or I can use this machine.'”
“If I’m starting my business I might slightly more inclined to go that route,” she added.
James B. Cutchin covers business in the Coachella Valley. Reach him at james.cutchin@desertsun.com.
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