Indianapolis restaurant fights effects of nationwide labor shortage
James Jones, co-owner of His Place Eatery in Indianapolis, talks about how the restaurant is feeling the effects of a nationwide labor shortage.
Jenna Watson, Indianapolis Star
After months of being out of work due to the coronavirus pandemic, Okara Imani felt she had a decision to make.
It was last September, and Imani was weighing how much longer she could afford to spend waiting to be recalled to her bartending job at the Chatterbox Jazz Club on Mass Ave., or whether she should seek work elsewhere.
Imani, now 28 years old, chose the latter. She decided to leave the service industry for a more reliable front desk job at an Indianapolis high school. She doesn’t regret it.
“Folks in the industry like myself, we simply had to move on — to adapt,” Imani said almost a year into her new job. “We had to rearrange our lives in a way that didn’t include an industry that was so uncertain for eight months. And so yeah, why go back if they found something that situates with them better?”
Imani’s story is representative of the reallocation of labor spurred by the coronavirus pandemic. At first glance, Indiana’s labor market appears healthy and recovering from the pandemic’s business disruption of 2020.
The unemployment rate is lower, the labor force participation is higher than neighboring states, and postings for available jobs abound. Yet, data from various sources point to a more nuanced labor situation, one in which sectors like the one Imani left — leisure and hospitality — have a more pronounced worker shortage and employers struggle to hire.
“We went through the biggest quarterly shock to the U.S. economy in history,” said Michael Hicks, director of the Center for Business and Economic Research at Ball State. “The share of job losses in the second quarter of last year was equivalent to all the job losses in the Great Depression over four years. So there would naturally be, I think, a fairly big shock to the matching of workers to businesses.”
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Indiana lost 420,000 jobs at height of the shut down in the pandemic
To understand Indiana’s current employment situation, IndyStar analyzed data from the U.S. Bureau of Labor Statistics, Indiana Department of Workforce Development, the St. Louis Federal Reserve and the nonprofit Opportunity Insights.
For instance, the Indiana Department of Workforce Development says private sector employment totaled 2.75 million in February 2020.
However, employment sunk to 2.33 million in April of that year as the state’s economy shed jobs amid a forced shutdown on nonessential businesses that aimed to lessen the transmission of the highly infectious coronavirus.
The department’s latest employment report notes that Indiana’s private sector recovered 96,000 jobs year-over-year in July, bringing total private-sector jobs to 2.65 million, which while an improvement to recent months is still lower than the pre-pandemic level. The state unemployment rate is holding steady at 4.1%, below the national rate of 5.4%.
The agency, which administers unemployment insurance benefits, says that manufacturing, trade, transportation and utilities, private education and health services, and professional and business services experienced the most job growth.
Still, Opportunity Insights, a nonprofit at Harvard University that uses real-time data to measure the economic impact of the coronavirus pandemic, offers a more nuanced picture of the state’s employment situation. The nonprofit sources payroll data from Intuit and Paychex, timesheet data from Kronos, worker-level employment data on earnings and employment from financial services company Earnin.
Using January 2020 as a baseline, data the nonprofit has gathered shows that Indiana’s total employment slumped nearly 23% in April of last year and has fully recovered, now about 3.8% higher than it was at the beginning of 2020.
But, Andres Vargas, a senior lecturer in economics at Purdue University who specializes in labor and health economics, notes a closer look at the data reveals differences in how Indiana workers have recovered from the pandemic based on differences in education and income.
The rise in the state’s total employment is driven by an increase in jobs among middle income workers paid more than $27,000 and high-wage workers earning greater than $60,000. Low-wage individuals who earned less than $27,000 were the most severely impacted by the pandemic, with employment dropping 35% in April 2020.
Employment rates among low-wage workers began rising in the second quarter of last year as Indiana began a phased reopening of its economy. But employment decreased in December by as much as 15% below the baseline. It’s recovered somewhat since then, dipping in June to 12.4%, the latest data available via Opportunity Insights.
“That is not the case for high-income individuals,” Vargas said. “When we look at high-income individuals, we see the opposite. During the first wave of the pandemic, employment went down to 12.8%, but it’s since recovered and is 14.5% higher than it was in January 2020.”
Digging even further, Vargas notes that low-income individuals working in the leisure and hospitality industry have been the most affected by the pandemic. Employment in that industry nosedived more than 49% in April 2020.
The sector’s recovery has lagged. Though strides are being made, they haven’t been enough to reach pre-pandemic levels. Employment remains down by 4.2%.
Now hiring
Signs are everywhere. Warehouses, retail shops and call centers are seeking workers. Some offer increased hourly wages, extended benefits, signing bonuses and other incentives to entice workers.
A fast-food restaurant on East Washington Street near downtown is offering more than $12 an hour and a 401(k).
Postings from employers around the state total more than 143,000 as of Aug. 16, the Indiana Department of Workforce Development said.
The most recent job openings and labor turnover survey from the U.S. Bureau of Labor Statistics notes that Indiana had an estimated 182,000 job openings as of March.
During that time, there were 117,000 hires and 118,000 separations, which include people who quit, are laid off and other discharges. The figures were not adjusted for seasonal variations.
“When the number of hires exceeds the number of separations, employment rises, even if the hires level is steady or declining,” the agency notes in the survey’s report. “Conversely, when the number of hires is less than the number of separations, employment declines, even if the hires level is steady or rising.”
In the leisure and hospitality sector, employment remains below pre-pandemic levels, and restaurants say they’re having trouble finding workers. Statewide, job postings — which vary by date — in the sector was 69% higher than the baseline as of Aug. 20 and nearly 18% on Aug. 27, according to Opportunity Insights data.
“That tells me there’s at least a shortage of workers in those industries because the level of employment is down in leisure and hospitality by 4.2% as of June 27,” Vargas said. “It’s not that there are not jobs available in those industries. Firms are trying to hire but they are unable to fill out those positions and that leads to the low level of employment in those sectors.”
His Place Eatery struggles to find workers
Chef James Jones, the owner of His Place Eatery on East 30th Street, is struggling to find workers. He’s down at least eight to 10 people to fill out a staff that supposed to be in the mid-30s. Jones also is searching for a front-of-house manager.
Jones, who co-owns His Place Eatery with his wife, Shawn, has been hiring throughout the pandemic. The restaurant’s soul food menu serves up traditional Southern dishes and smoked meat. The restaurant offers both dine-in and carry-out services.
So when restaurants were forced to close due to the coronavirus, His Place Eatery seamlessly transitioned to a carry-out-only model without business slowing. Initially when the pandemic hit, Jones said he told staff that he understood there were many uncertainties and would support them taking time off.
As such, the restaurant saw roughly a 10% to 15% drop-off in staffing, Jones said, adding that he strived to make his business as safe as possible. Still, the restaurant needed extra staff to help supplement the high volume of carry-out business and began hiring about two months after the pandemic began.
The restaurant is constantly hiring and understaffed.
“In all of my 12-and-a-half years, this is definitely the most challenging that I think it has been. It’s really weird because I talked to a lot of restaurant owners or managers and business is booming but labor shortages are at unbelievable rates. Those two things are going in opposite directions.”
His biggest challenge is hiring front-of-house staff.
The restaurant recently posted to its Facebook page a graphic advertising available positions for fry cooks, dishwashers, line cooks, servers and prep cooks. The pay range: $13 to $16 an hour. Servers, the restaurant said, earn $7.25 per hour but can make up to $20 to $25 an hour with tips.
“We encourage walk-in applicants!” the post reads. “Bring your résumé (or just fill out an application when you arrive) and be prepared to interview with a manager on the spot!”
Jones said the restaurant industry is suffering from an imaging problem spurred by online conversations about low wages. But His Place Eatery, he said, pays servers more as it seeks to compete against national chains for labor.
“I think that from an imaging standpoint there was a lot of talk online and a lot of talk on social media spaces about wait staff being underpaid and restaurants that have been underpaid,” he said. “I think that for small local restaurants like ours that really hurt us.”
A possible sign of concern?
Indiana has a labor force of roughly 3.4 million workers, according to state data. That is an increase of nearly 41,700 over the same period one year ago.
The state’s labor force participation rate — a key economic metric — is at 63.2%, above the U.S. rate of 61.7%, yet still below the pre-pandemic level.
Economists such as Andrew Butters, assistant professor of business economics and public policy at the IU Kelley School of Business, say that’s concerning.
Based on current data, the July rate is still about just under one percentage point below pre-pandemic levels.
Some workers have left the workforce.
“These are missing people that were working before the pandemic and now they say they’re not currently working, but they are also not actively looking for a job,” he said.
In May, Gov. Eric Holcomb reinstated the work search requirement for unemployment insurance eligibility. Claimants must actively search for work in order to be eligible for unemployment insurance. These people are counted as in the workforce.
What’s keeping those workers out of the labor force is unclear.
Would increasing the minimum wage or ending unemployment benefits bring back workers?
Though politicians have turned the pandemic’s employment issues into partisan talking points about extended unemployment benefits or the minimum wage, several economists say nothing in the available data shows a cause for labor shortages.
Economic data is imperfect and lagging, so it’s simply too early to tell.
“Nothing about now is really normal,” said Hicks of Ball State, adding that the pandemic introduced significant challenges in child care duties and risk of disease for immunocompromised people.
The decline in the labor force seen over the past 18 months remains very stubborn, Hicks said. The matching process of labor markets has not yielded the sort of recovery that’s expected.
According to the July employment report, the U.S. saw nearly a million jobs created, by which Hicks estimates Indiana’s share should have been 20,000 plus jobs. “We only had 10,000 created so we’re experiencing a much slower recovery than the nation as a whole,” he said.
There appears to be a mismatch in the jobs available and the skills of available workers, he said. There also could be a mismatch between where the jobs are located and where the workers live.
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Other issues include child care and a growing pandemic, now marked by the coronavirus’ delta variant, which could affect both the supply and demand for labor. He notes the latest consumer spending report indicated a reduction in spending.
And lastly, Hicks said it appears that job growth is occurring more in some sectors, such as warehousing and transportation, and the workers businesses need are no longer available.
“Those workers are either looking for something different in a different industry because the job characteristics aren’t satisfactory or there are these other factors weighing on them,” Hicks said.
The current economic conditions have led to better conditions for low-wage workers during the pandemic, Vargas said, noting that as of Aug. 20 the number of postings for jobs that required minimal education had increased nearly 67%.
Businesses are offering higher wages to attract workers and signing bonuses. Low-wage workers are likely benefitting the most from unemployment programs or they’re moving away from the leisure and hospitality sector to more stable employment opportunities during the pandemic.
That is hard to measure with the current data, he said. Vargas is curious to see what happens in September after unemployment programs expire.
Read more: After court battle, what you need to know about federal unemployment benefits in Indiana
Still, he notes that a possible labor shortage due to unemployment benefits cannot be generalized for all industries. Some sectors are experiencing a shortage of untrained workers.
“Right now, there is a big shortage of construction workers,” he said. “That shortage is not because of the unemployment benefits. It’s because there are really not enough construction workers to be able to meet the demand.”
This stems back to the financial crisis of the 2007-2009 Great Recession. Workers were displaced, he noted, adding that they eventually moved away from the sector and training declined.
“Now that the housing market is booming and they are trying to increase supply, there are not enough construction workers trained to meet the demand,” Vargas noted. “So in this case, this is a shortage of people with the required skills to work in this industry.”
Switching careers during pandemic
Weighing her options, Imani said she felt going back to the service industry didn’t make the most sense during an ongoing infectious disease pandemic.
Imani has at least 10 years of experience in that industry. She’s sold popcorn, waited tables at a sushi restaurant and most recently worked as a bartender at the Chatterbox Jazz Club. On the side, she’s been a substitute teacher and performs as a local singer.
At first she eagerly waited for the Chatterbox to reopen, but eventually she needed something to occupy her time. Also, she didn’t want t a job where she was in close proximity with other people.
Her current employer, with whom she had an existing relationship, reached out to her about a permanent job that came with benefits. Imani seized the opportunity.
“I was not and will not be trying to do the serving with vaccinations and not vaccinations, masks and not masks,” she said. “I felt like people could do without or restaurants could adapt. That’s it. I was not really concerned with whether or not they wanted servers.”
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While she misses the nuance of her customer relationships and favorite people at the Chatterbox, which did reopen Aug. 30, Imani’s new job has provided a balance of in-person instruction and virtual learning for students exposed or who test positive for COVID-19. She’s comfortable with that.
“There’s wasn’t a lot of reasons to go back to something that was so exposed,” she said. “In an industry where you’re very much discouraged from calling off in the first place, it just doesn’t make sense.”
Contact IndyStar reporter Alexandria Burris at aburris@gannett.com or call 317-617-2690. Follow her on Twitter: @allyburris.
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