High-End Food, Low-Wage Labor

High-End Food, Low-Wage Labor

Some people work in restaurants as a lifestyle choice: they love the fast pace, the quick jokes, the often easy-flowing booze. At the height of a busy shift, if everything’s going right, a team of skilled cooks and waiters can enter a kind of adrenaline-fueled flow state that’s hypnotic and addictive. Some people choose it because they got burned out as grad students or software engineers or attorneys. Some people work in restaurants to make money until they graduate or get their big break in show business. It can be lucrative, especially for young, good-looking, and agile waiters, working for a great employer in a big city, where customers practically fight for the chance to buy expensive wines and $50 entrées and truffle supplements from the latest hotspot.

But for many others, restaurant work is neither a fun lifestyle choice nor the fulfillment of a foodie dream. It’s a job, a way to feed and house themselves and their families. The barriers to entry in the industry may be low, but the work is repetitive and hard, the conditions can be uncomfortable or even dangerous, and each job requires some specialized skills.

The United States has surely made the transition from a manufacturing-based to a service-based economy, and that’s good news for American restaurants, which, according to the National Restaurant Association (NRA), take in 49 cents of every dollar spent on food. Despite two recessions inside of a decade, the restaurant industry’s sales grew from $379 billion in 2000 to more than $604 billion in 2011.

This continued growth and success have yet, however, to catch up to many of the more than twelve million people who work in the industry. In November 2011, the average weekly earning for an employee in a full-service restaurant was $274, according to data from the Bureau of Labor Statistics. That’s an annual income of $14,248, which puts a family of two or more below the poverty line. Only a small fraction of American restaurant workers have health insurance or paid sick days, and stories of wage theft, both inadvertent and intended, are common. For every high-salary executive chef or waiter who takes home hundreds of dollars in tips per shift, there are many more dishwashers, prep cooks, or bussers applying for public assistance; using a public hospital’s emergency room as a doctor’s office; or living in a car, unable to afford housing. Is the current restaurant model being subsidized by underpaid employees? What is the true cost of dinner in a restaurant, and is the dining public willing to pay it?

Low Profits, Low Wages

Ask any restaurateur, and he or she will tell you that it’s not a big-profit business. “It’s a very difficult business to make money in, as an owner,” says Peter Hoffman, chef and owner of Back Forty, in New York City. “If you’re making any kind of profit, you’re already ahead of the game. Lots of restaurants go out of business because they couldn’t make a profit. Any black number is a good number.” Tom Colicchio, chef and owner of Craft Restaurants, with outlets in New York City, Los Angeles, Dallas, Las Vegas, and Mashantucket, Connecticut, concurs, saying, “People think that restaurants make a boatload of money. They see a busy restaurant and think the margins are 30 percent, like retail.” Restaurant profit margins, according to owners’ self-reports, typically range from 2 percent to 8 percent.

Food prices are on the rise worldwide, as are rents in many urban areas in the United States, despite the economic downturn. In order to preserve profits, restaurant owners often look for ways to save money on labor, which normally makes up about 30 percent of a restaurant’s operating budget. Paying employees the minimum wage is an easy place to start.

The NRA, the nation’s largest restaurant trade organization, has long lobbied against raising the minimum wage. In 1996, Herman Cain, onetime 2012 GOP presidential hopeful and alleged serial sexual harasser, became its chair and then CEO. The previous year, Cain, as CEO of Godfather’s Pizza, had testified to a joint economic committee in Washington that a proposed minimum wage increase, from $4.25 to $5.15 per hour, would destroy jobs and price first-time job seekers out of the market. Once at the helm of the NRA, Cain used the organization’s resources to try to block an increase in both the minimum wage and the tipped minimum wage (the lowest wage that an employer can pay a tipped employee, providing that income from tips, combined with the base wage, equals the federal minimum wage). The custom in the United States of “voluntarily” tipping for good service is a built-in payroll subsidy for restaurant owners and, those owners argue, a way to keep prices affordable, which reflects the troubling and false notion that affordable restaurant food is an inalienable right more valuable than restaurant workers’ well-being.

Established in 1966, the tipped minimum wage was originally intended to equal no less than 50 percent of the federal minimum wage—but it’s now been at $2.13, just 29.4 percent of the federal minimum, since 1991, and was frozen there in 1996, when President Bill Clinton signed the Minimum Wage Increase Act, which effectively decoupled the tipped minimum from the federal minimum. According to a report by the Economic Policy Institute (EPI) and the Center on Wage and Employment Dynamics (CWED), “Inflation has eroded the purchasing power of the tipped minimum wage; as a result, the real value of the tipped minimum wage is at its lowest level since it was established in 1966.” Workers in some states receive a higher minimum or tipped minimum wage than the federal rate, but across the board, tipped workers are more than twice as likely as workers in other fields to fall under the federal poverty line, according to the EPI/CWED study.

UNFREEZING THE tipped minimum wage is one of the main goals of the Restaurant Opportunities Center United (ROC-United), a national restaurant workers’ organization whose mission is to improve wages and conditions in the industry. Founded in New York City in 2001 with the original goal of helping 350 displaced workers from Windows on the World, a restaurant atop the destroyed World Trade Center, ROC-United now has affiliates in New York; Chicago; Los Angeles; Michigan; New Orleans; Philadelphia; Miami; and Washington, D.C. Among its many initiatives are two worker-owned and run restaurants, in New York City and Detroit, both called COLORS, that provide job skills training. COLORS rents part of its restaurant space to ROC, which provides worker training, an arrangement that in turn allows COLORS to pay its employees a sustainable wage. ROC has worked closely with Representative Donna Edwards of Maryland on H.R. 631, the WAGES (Working for Adequate Gains for Employment in Services) Act, which would return the tipped minimum wage to 70 percent of the federal minimum over two years. Introduced in February 2011, it is currently in committee.

Every time there is a proposed minimum wage hike, business groups such as the NRA and the politicians in their pockets sound the old neoclassical warning about dire effects on profits and jobs. According to a recent NRA Public Policy Issue brief,

Wage mandates are an ineffective way to reduce poverty and cause restaurant operators to make very difficult decisions to eliminate jobs, cut staff hours or increase prices. These decisions end up hurting the very employees that wage increases are meant to help.

Numerous studies indicate the opposite: that higher minimum wages do not in fact decrease employment. David Card and Alan B. Krueger’s 1994 study, “Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania,” published in the American Economic Review, was a landmark piece of research that refuted job-loss claims. A paper by Arindrajit Dube, William Lester, and Michael Reich that built on Card and Krueger’s research design, “Minimum Wage Effects Across State Borders,” published in the November 2010 issue of Review of Economics and Statistics, “found that increases in the minimum wage raise workers’ earnings without reducing employment,” according to a summary by the National Employment Law Project (NELP).

Working Sick, Without Insurance

More recently, the NRA has been outspoken in its support of Senator Orrin Hatch’s American Job Protection Act (S.20), currently in committee, which would repeal the Patient Protection and Affordable Care Act (PPACA) requirement that employers with more than fifty full-time-equivalent employees offer affordable health benefits by 2014 or face penalties. From a September 2011 NRA press release:

“We are an industry with a high percentage of young, mobile, part-time workers, as well as an industry comprised mostly of small businesses. These businesses will be negatively impacted, and jobs lost, if the employer mandate is not repealed or changed,” said Scott DeFife, Executive Vice President of Policy and Government Affairs for the National Restaurant Association. “The National Restaurant Association appreciates the leadership of Senator Hatch and Congressmen Boustany, Tiberi and Barrow for standing up for restaurant industry jobs.”

Despite the fact that the NRA counts among its members about 175 corporations (including 7-Eleven, Burger King, McDonalds, Marriott International, Starbucks, and Walt Disney World), it is often small restaurants, without the benefit of bulk buying power or sophisticated accounting offices or national brand recognition, that have figured out how to stand up for the people who actually perform restaurant industry jobs.

Celina Tio, chef and owner of Julian in Kansas City, Missouri, pays half the premium on her full-time employees’ health and dental insurance plans. Tio explained that in order to afford this, “the only cuts I have made are to my profit.” Gerard Craft, chef and owner of Niche and two offshoot restaurants in St. Louis, Missouri, also covers half the cost of full-time employees’ insurance premiums. For Craft, it’s a way to attract the best employees: “At the end of the day this is an incredibly tough industry with incredibly low margins, but if you can take care of the people who are taking care of you, it’s kind of a win-win.”

Tom Colicchio’s restaurants cover a share of their employees’ health insurance premiums as well. “I think everybody should have health insurance,” he says. “The idea of the transient employee, the college student waiting tables, that’s not how we operate. People have families to take care of.” As for how his business can afford it, Colicchio says that having benefits creates an incentive for workers to remain in their jobs. “We’re not constantly training people, we don’t have a lot of turnover, so that saves us some money.” According to J. Bruce Tracey, an associate professor at the Cornell University School of Hotel Administration, employee turnover can be enormously expensive to a restaurant, eating up, conservatively, between 15 percent and 30 percent of gross wages on a per-employee basis—money that, if saved, could certainly be applied to health benefits or higher wages.

Part-time workers, often not eligible for insurance coverage, would still benefit from the right to earn paid sick days, as would those full-time workers in restaurants whose bottom line could truly not absorb the additional cost of health insurance. However, of the more than 4,300 restaurant workers surveyed nationwide by ROC and various local industry groups, fewer than 13 percent reported having paid sick days, and 63 percent reported working while sick, rather than lose a day’s wages. A cook with twenty-five years’ experience in the industry told ROC-Maine,

For me, what kind of benefits have I received? Honestly, like none.…We don’t have any sick day benefits at all. If you’re sick you just don’t get paid.…Not having any benefits has affected my family because, when I get sick my family has to pay for it, which is really, really expensive. So I just usually try to suck it up.

“Everyone in this business has a story of going to work sick,” said Andrea Lemoins, co-coordinator at ROC-Philadelphia. “It’s a public health issue. Restaurants are vectors for whatever virus is going around in a given season.” This author recalls a day from her own time working in a busy fine dining kitchen, in which a line cook working with a stomach virus would periodically turn to vomit in a wastebasket while preparing customers’ meals. Food-borne illness outbreaks, whose likelihood would be greatly diminished in a paid-sick-days environment, represent an enormous expense to a restaurant, with industry estimates ranging from $42,000 to $75,000 per incident, and significantly more if a serious illness or death results.

Wage Theft

Wage theft of many varieties is common in the restaurant business. It can be inadvertent, as when an employer isn’t fully aware of all the facets of what can be very complex labor laws; it can also be intentional. Some owners are reluctant to change once-legal payment practices that have been outlawed by new labor laws, or claim ignorance to protect the bottom line. Wage theft can take different forms, depending on whether it’s perpetrated against front of the house staff (waiters, bussers, bartenders, who are tipped) or back of the house staff (cooks, dishwashers, cleaners, who are paid a straight hourly wage or salary).

“There’s no question that every variety of sleazy scam is at work on the floor, in the front of the house,” said chef-turned-author (and my sometime employer) Anthony Bourdain, whose memoir of a twenty-eight-year restaurant career, Kitchen Confidential, published in 2000, shines a light on some of the unsavory facets of the business. Credit card companies charge businesses, including restaurants, a small per-transaction fee, and some owners take money from the waiters’ tip pool to cover that cost, a practice Bourdain calls “appalling. By the time [waiters] are taxed out, their paycheck is almost nothing. If you make the money for the house, you should get to keep all of your cut of it.” In November 2011, with support from ROC-Philadelphia and the Taxi Worker’s Alliance for Pennsylvania, Philadelphia’s City Council passed the Gratuity Protection Bill, which prohibits business owners from taking any portion of a tipped employee’s earnings to cover business expenses.

Tipped employees’ earnings are jeopardized to a greater extent when owners subsidize the wages of non-tipped employees, such as managers, maitre d’s, silver polishers, and napkin folders, by adding them to the tip pool, in violation of the Fair Labor Standards Act. Maimon Kirschenbaum, a plaintiff’s attorney who has handled more than a hundred wage-violation cases for employees of New York City restaurants, says, “Restaurants throw all kinds of people into the tip pool as a way of not having to pay them. There’s so much money in the tip pool that historically it’s been very easy [for owners] to take advantage of that.” Roughly 15 percent of the workers surveyed by ROC-United in eight areas of the United States report having a portion of their tips illegally retained by management.

Kirschenbaum and his colleagues also handle cases against New York banquet hall owners and restaurants with private party rooms, which charge clients a service fee (often 20 percent, equivalent to a voluntary tip for excellent service), yet illegally retain some or all of that money, rather than distributing it to the waitstaff. He recently represented a woman whose only income was in tips; the restaurant owners did not pay her a wage at all.

In the back of the house, wage theft often takes the form of overtime violations, with employees not being paid extra for overtime hours worked or being paid less than minimum wage. In her 2009 book, Wage Theft in America, Kim Bobo, founder and executive director of Interfaith Worker Justice, writes, “Restaurants are notorious for stealing wages from workers…Every single IWJ-affiliated workers’ center regularly sees restaurant workers who haven’t been paid, with the worst abuse happening with dishwashers, table clearers and cooks who work in the back of the restaurants.”

Undocumented workers, who make up approximately 20 percent of the restaurant labor force nationwide, according to a 2008 analysis by the Pew Hispanic Center, are particularly vulnerable to wage theft, because the precariousness of their circumstance makes them less likely to complain or seek redress of grievances, for fear of being fired or deported. Kirschenbaum said that he has counseled undocumented back-of-the-house workers with legitimate grievances not to bring lawsuits against their employers, because they had no legal protection against being fired.

Undocumented workers who are paid in cash have no record of wage-and-hour violations, and those who are paid “on the books” have provided invalid documents to create the appearance of satisfying owners’ legal requirements for hiring them. “What’s heartbreaking, and what people don’t understand, is that in order to hire these guys, you’re treating them as if they are legal,” says Anthony Bourdain, more than a decade after his book came out. “They’re paying all their withholdings and taxes, but when refund time comes, they can’t claim anything, or make use of those benefits, because without a valid Social Security number, they don’t really exist. They’re paying into the system, but they’re not benefiting from it.”

Toward a Sustainable Model

Despite the stagnant economy, restaurants continue to thrive, adding outlets, enjoying ever-increasing sales, and employing nearly 10 percent of the U.S. work force. Some workers also thrive in the industry, benefiting from sustainable pay and good workplace practices; others do not. Everyone who eats in restaurants, works in restaurants, owns restaurants, or purports to speak for restaurateurs has a part to play in moving the business toward a more sustainable labor model, in which all employees can earn a living wage, maintain their health, and be free from wage theft.

As the business has expanded, working conditions have improved for some workers. Bourdain notes that immigrant workers have been given the opportunity to rise through the ranks in some restaurant kitchens, bringing their pay rate in line with their culinary school–trained counterparts as the workers began to recognize their own worth. In response to a dramatic rise in class-action lawsuits in the last five years, some restaurants have dispensed with shift pay, tip misappropriation, and other forms of wage theft. And new legislation, such as tip protection in Philadelphia, the Wage Theft Protection Act in New York, and recent minimum wage increases in San Francisco and Washington state all contribute to a more sustainable business model.

Nevertheless, owners fail to recognize the value of low employee turnover. In “New Target for The Occupy Movement: You,” a December 2011 Web editorial for the trade publication Restaurant Hospitality, editor Bob Krummert disparaged ROC’s attempts to publicize workers’ problems, writing, “Labor organizations showed up during the latter stages of Occupy Wall Street, eager to co-opt the movement’s energy for their own purposes,” and ending with, “Many customers may conclude that if a restaurant’s workers have complaints about their jobs, they should simply get another one. In the restaurant industry, it’s always easy to do.” Such an attitude demeans both workers and customers, and surely sets the stage for more costly employee turnover.

It is workers who must fight for improved wages and conditions for themselves and their colleagues, both on the job and within a larger organizational framework, be it the Occupy movement; justice organizations like ROC and its affiliates; the Department of Labor; the legal system; or, where they have been established, unions. It’s worth noting, however, that although opponents of ROC are quick to cry, “Union!” in response to its activities, ROC itself is not necessarily seeking to unionize workers. “The endgame is that all workers have dignity and respect on the job,” said Rekha Eanni-Rodriguez, speaking as co-director of ROC-NY (a position she left in November 2011). “Whether that happens through a union or ROC doesn’t really matter to us. It’s ultimately about building power and voice for the workers.” Fabricio Rodriguez (no relation), co-director of ROC-Philadelphia, who helped organize the Philadelphia Security Officers’ Union in 2010 before joining ROC, said, “[Restaurants] are just not a sector where the union model makes sense. There are thousands of employers with hundreds of different work arrangements. It just doesn’t lend itself to the union model.”

Fine-dining restaurants, in which some workers and owners willingly sacrifice pay and personal life for the chance to make art from food, do present challenges for employee organizing. However, a percentage of food and beverage workers in the United States have been unionized since 1891, when the American Federation of Labor chartered the Hotel Employees and Restaurant Employees International Union (HERE). Originally segmented into separate affiliates by job title, HERE’s structure was revised in 1973, bringing all affiliates under one local for every region represented. In 2004, HERE, which found itself with limited resources as it organized low-wage workers in the growing restaurant, casino, and hotel sectors, merged with the Union of Needletrades, Industrial, and Textile Employees (UNITE), whose jobs had largely been moved offshore by the 1990s. “UNITE was the union that had considerable resources to take on new organizing challenges, but did not have an industry anymore to organize,” said Evan Cobb, communications specialist for UNITE HERE. “At the time it certainly seemed like an ideal marriage of two organizations that would breathe a lot of new life into organizing drives, and it did that in its initial days.” Within five years, the two organizations split, a divorce that Cobb calls “somewhat tumultuous and extremely complicated.”

UNITE HERE now has about 275,000 members, a third of whom work in the food service sector, primarily in higher education food service, public school food service, in-flight catering, business and institutional cafeterias, airport concessions, and stadium and convention center concessions. With a few exceptions, including sommeliers and chefs at some high-end Las Vegas casino restaurants, and the employees of New York’s Central Park Boat House, who undertook a successful September 2011 campaign to join the New York Hotel and Motel Trades Council, AFL-CIO, the majority of employees in full-service, freestanding restaurants are not unionized.

“At some stages of history, you would find cities with large numbers of restaurants with union workers, but [fine dining] is a much smaller part of the union at this point,” says Cobb, citing the industry’s high turnover rate and the shift to large corporate entities as reasons for the union’s decline in the high-end context.

JUST AS conscious consumers seek out locally grown, organic, or fair-trade foods, so must they recognize that low-priced food in restaurants is the result of damaging subsidies at one or more points in the food chain, be they agricultural subsidies that artificially depress prices or low wages that keep meal prices artificially low. We must start to examine and, if necessary, challenge the labor conditions in the restaurants where we eat. Voting with one’s feet and dollars is an important first step, albeit one that can only happen as a result of workers organizing and broadcasting their demands to owners and consumers.

In December 2011, ROC-United published the “ROC National Diners’ Guide 2012,” which indexes pay rates, sick-day policies, and opportunities for advancement at the top 150 highest-revenue-grossing restaurants in the United States, as well as conditions at the “high road” restaurants that have partnered with ROC. The guide, by no means comprehensive, is meant to be a starting point, said Saru Jayaraman, co-founder of ROC-United. “The real discussion has to be about people demanding an increase in the minimum wage, demanding the right of all workers to earn paid sick days, and asking managers and employees about conditions in the restaurants where you spend money. We want consumers to start by using the guide, but I think there’s a myth out there that the individual food choices we make are going to change the industry. They’re not. It can’t just be about our individual choices.”

We may also look to the Danish example, where restaurant prices are high, employees are generally happy, and business is better than ever. “Lunch in a restaurant in Denmark—a sandwich, a salad and soup and a glass of wine—it’s $100 if it’s a nickel,” says Mitchell Davis, vice president of the James Beard Foundation, which offers events, programs, and education around the culture of food. “And it’s because the employees are paid full wages, and everyone gets full benefits. There’s a 25 percent tax added to every transaction in Denmark, and so you lead a different life than you might in the States—you have different expectations—but the restaurants are full, and there are tons of them. So there’s clearly another successful way to operate restaurants, but people have to believe in paying higher prices.”

We may also look to the Italian or French examples, where restaurant prices are higher than in the United States, because waiters are paid a living wage and taxes are higher, yet business remains vibrant.

However, Davis (and others interviewed for this story) also pointed out the recent example of France, where a new thirty-five-hour work week and other labor reforms in the fine-dining sector have increased the cost of doing business to the point that many restaurants are now closed two or more days per week, rendering them less profitable and in jeopardy of closing altogether.

OCCASIONALLY, WORKER organizing dovetails with a consumer boycott, creating a ripple effect far beyond the initial protest. In New York, workers from two outlets of the Saigon Grill restaurant group spent nearly two years picketing the restaurants and calling for a consumer boycott in protest of wage-and-hour violations and retaliation firings against delivery workers who were paid less than $2 per hour and intended to file a wage-and-hour lawsuit. In 2008, the workers were awarded a $4.6 million settlement for federal and state labor law violations, and Saigon Grill owners Simon and Michelle Nget were arrested and charged with falsifying records and evidence tampering; Simon was given a three-month jail sentence. The two outlets, one in Greenwich Village near New York University, and one on the Upper West Side, were sold to separate owners. At the Upper West Side branch, ongoing labor issues, including wage-and-hour violations, age discrimination, and the new owners’ failure to pay the balance of the workers’ settlement as promised, have led to renewed picketing and a boycott, under the auspices of the Chinese Staff and Workers’ Association and National Mobilization Against Sweatshops (NMASS). Inspired by the Saigon Grill workers and led by NMASS, community members, faith-based organizations, and students have now embarked on a campaign to make the Upper West Side a “sweatshop-free zone,” with sixty businesses, including restaurants, nail salons, pharmacies, and other retailers, pledging to follow fair workplace practices and comply with all labor laws. Tracy Kwon, an organizer with the Justice Will Be Served campaign, also an NMASS project, described the picket at the heart of this campaign. “On any day, you’ll see workers from factories in New Jersey, workers from other restaurants on the Upper West Side, community members, residents, and people whose work is taking care of children or the elderly. It’s not just the workers from Saigon Grill. So you wonder, do they just want to see these specific workers at Saigon Grill get justice? Or are they all just fed up with the state of affairs for workers in general?”

Laurie Woolever is a graduate of Cornell University and the French Culinary Institute. She works as a writer and editor in New York City.