Barometers
A trick knee will tell you when a storm is coming because the fluids trapped in an improperly healed joint expand as a low pressure system approaches. A dead canary will tell you exactly when the air in a mine has gotten too toxic to keep breathing. For indicators on the economy, get yourself a minimum wage job.
Today I was told a hilarious story involving a restaurant, how employees are treated poorly, and what they’re doing in reprisal for the abuse. What I’m going to tell you is absolutely true, but for legal reasons, I’ll decline to mention the name of the restaurant involved. It’s a national franchise that is both well known and quite popular. The actions of its regional management are a barometer themselves, showing us exactly how bad the economy’s getting. What the employees did in return, on the other hand, illuminates an undeservedly forgotten element of labor economics.
What follows is perhaps more than you care to know about the restaurant business, but I hope you’ll stick it out and find it as fascinating as I did when it was explained to me.
Restaurants are a great indicator of economic health because the money that gets spent there is almost exclusively expendable. Food is not something we can only get at restaurants, and in fact almost without exception it’s cheaper to cook for yourself than eat out. If fewer and fewer people are eating out you can put money on the fact that incomes, or income security, are falling. Eating out is a luxury, and unlike vacations to Hawaii or a new TV, it’s a luxury that’s easy to trim from the budget without cutting into your standard of living.
Those that do continue to eat out are not immune from the specter of economic uncertainty; far from it. The generosity of tips are strongly correlated with the economic fortunes of the people that eat out. Things looking good, tip big when your server’s done an awesome job. But if you’re counting pennies and aren’t so sure about next month’s bills, you just can’t afford to tip more than 10%. If that.
Servers are the first people to feel the effects of an economy in trouble because long before people see their paychecks shrinking, servers see their tips dry up in the face of fear for the future. So I was quite interested to hear about the new cost cutting measures the restaurant in question has undertaken to try to keep profits up in the face of a dwindling clientele.
The first, and most obvious solution, is to increase productivity. Typically, businesses do this by firing people and making the workers that remain do the jobs of those that were fired. This is exactly what this restaurant did: they cut the hours they scheduled for their servers to no more than 20 hours a week, and when people quit they didn’t replace them. Six months ago, each server was responsible for three tables. Now they wait four tables. That’s a 25% increase in productivity, but now they’re over working the employees that stuck around because they can’t find a better job.
It’s also established practice to pay servers minimum wage, so while a fourth table would provide additional income for servers in extra tips, those just aren’t coming any more. The source of this information says tips are down, averaging to about 12%, but she has to tip out 9% to other workers at the restaurant who don’t get tips, like the bussers, hosts, bartenders, etc. So while she sold over $1100, she walked home with less than $100. That seems like a lot of money for six and a half hours work (if you include hourly wage, it averages out to roughly $23/hour), but she’ll only work three or, maybe, four nights a week.
So the restaurant is facing hard times, and foists the onerous task of paying for maintaining their profit margins onto its workers. Old news. But somewhere at the corporate home office of this particular franchise, an accountant said this wouldn’t be enough, and so the regional manager stopped into a local franchise and proceeded to introduce a new round of cost cutting measures.
First, the above mentioned change in how many tables each server takes. See above.
Second, no more employee discount on food. Employees used to get 50% off their meals while they were working, but no more. I guess the logic is that between fifteen servers, five cooks, a dishwasher and someone to plate the food, that’s 11 meals that were slipping past the bottom line each night. This is, quite directly, shifting the burden of the profit margin to the employees.
Third, increased bar staff. The bar is, and this should be no surprise, the most profitable part of the restaurant. Any restaurant really. If you’re charging even just five bucks for a bottle of beer poured into the glass, figure it out. So it makes sense to add more people to the bar: more bartenders, more total sales. But for the bartenders, they’re each seeing their tips go down, and their tip shares (the portion of regular server tips that are ‘tipped out’ and split among the rest of the employees) decrease because it’s spread out over more people.
Four, charge more for everything. Especially alcohol. Beer used to be five bucks, now it’s seven. People used to order two glasses, now they’re sticking to just one. The restaurant makes more money per beer, but servers and bartenders sell less, and thus get fewer tips. This applies to everything: appetizers, entrees, deserts etc. Fewer total sales, fewer tips.
The end result is that servers, bartenders … really everyone at the restaurant is making less than they used to. And now they pay full price for their meals. And they’re being yelled at for not selling enough overpriced food and beer. So naturally, they revolt, in a way only labor can. They steal. A lot.
The bartenders and servers in the lounge have taken to simply giving customers free alcohol, knowing that they’ll get a bigger tip by doing so. ‘On the house’ is code for ‘give me the money you would have paid these schmucks.’ This goes doubly for the employees of the restaurant, especially the bartenders, who rarely end the night less drunk than they began. Customers are also seeing the little extras that go with their meals, sides, deserts and what not, multiply, as servers seek to entice their charges to cough up a little extra money at the expense of the restaurant. Servers might simply decline to ring up things that are ordered and tell the customer it’s complementary. The other option is to tell the manager the customer complained and get them to comp the meal, and then tell the customer (who never complained in the first place) that the server is doing them a favor and is treating them to their appetizers because they’re such great guests.
And no one who works at the restaurant is paying for the food they eat. How could they? They’re not making enough money to eat out, and it’s this fact that is so uniquely illuminating. The restaurant in question had the usual problem with a few ‘lost’ drinks at the bar, or a few meals improperly comped each week, but in the last month the bottles have emptied themselves quicker, the shelves cleared themselves mysteriously, and customers have happily basked in the wave of complementary everything.
We often think of wages as having no bottom; conventional wisdom is that a person, sufficiently desperate, will work for almost nothing to make ends meet. But there is a bottom, because no one will work for less than what they need to stay alive. Why would they? If you’re going to die of starvation if you work or sit, might as well not break your back in the process. This floor, under which wages cannot fall or people will simply refuse to work, is what’s required to purchase the means of subsistence, the things you need to stay alive. Drop wages too low and people simply stop working.
Or start stealing.
In a bizarre twist, the regional bosses of the restaurant in question have given us a case study in where a subsistence wage resides. Restaurant employees may not be as bad off as people stuck in apparel sweat shops, but they are pretty close to the bottom of the ladder in terms of wages and benefits. By effectively cutting the wages of their employees, the managers of this restaurant have forced them to resort to ‘informal’ means of making up the difference so they can make ends meet. That means stealing booze and food, giving freebies to customers without permission, cutting corners with service to manage four tables instead of three.
In the process of cost cutting, the restaurant has shot itself squarely in the foot. The restaurant is making, in the month since these changes were implemented, 29% less money than the month before. If I can lay my hands on their official financials I’ll post them as proof, but for now take my word for it. By trying to shift the burden of their profit margin onto their workers, they eviscerated their own ability to turn a profit. They forgot, it seems, who was doing all the work in the operation.
The obvious lesson is be good to your employees. The more interesting lesson is how people make up that gap between their actual wage and what they need to access the means of subsistence. As the economy continues to worsen, in terms of real wages and real production, expect this kind of ‘informal’ income to become more common place. In the world beyond corporate bottom lines and profit margins, the rest of us have got to eat.
posted by Justin # 3/31/2008 11:01:00 PM 
