Are we being served? Restaurateurs swamped by labour rout in wake of bruising lockdowns

by | Dec 16, 2021 | Business

The world of work has changed dramatically in the past two years of pandemic. Emergency measures have sent businesses to the wall and left others unable to fill staff gaps. We have learnt overdue lessons on the value of the people who conduct the many backbreaking and thankless tasks in hospitality and tourism. But control of the commanding heights of the labour market remains with the big end of town, writes Michael Sainsbury.

As Australians emerge from lockdown smack into the silly season where work is as much focused on Christmas parties, lunches, dinners and drinks the nation’s hospitality sector should, by rights, be in for a bumper of a season. 

But a perfect storm in the hospitality and tourism sector, centred on an unprecedented labour shortage, means venues are so bereft of staff they are unable to take full advantage of booming demand after 20 months of lockdowns that have caused carnage in the sector.

Job ads on SEEK for hospitality and tourism were up 76.3% compared to a year earlier with a number of 100,000 vacancies being touted by industry groups.

The reasons are complex. They involve a mix of a sharp falloff in immigration, sector workers finding better work options, generational changes in the behaviour of young people and the rise of corporatisation in the sector pummelling small businesses.

The National Skills Commission was established last year to advise government on labour market requirements. Its Recruitment Insights Report found that 63% of employers in the sector surveyed between March and October 2021 had difficulty in recruiting, compared to 41% across all industries.

There is no question that the demand for food, booze and entertainment is there. People are cashed up with household savings rates up to 23.6% in June 2020 against a decade average of 6.9%. Overseas travel en masse is still on hold due to a combination of pandemic-battered flight schedules and the new Omicron variant causing both an international border “pause” and fresh dangers in a wide range of destinations including Europe, the US and Asia.

“Demand for our products is up 40% on last Christmas,” Sally Gosper, general manager of speciality food distributor Two Providores told Michael West Media (MWM). “The weekend of December 4-5 was already as busy as Christmas weekend last year.”

Pent up demand

The company specialises in local, niche produce and services some of the country’s high-end restaurants. Gosper says it lost 60% of business overnight when the first lockdowns hit last year. It was forced to pivot to new models such as selling direct to the public for the first time. Because of strained global supply chain, it sourced more product locally.

Pent-up demand is supercharging what would already be huge seasonal demand for the services of restaurants, pubs, bars and functions but proprietors and managers are desperate for staff in all parts of their operations.

Craig Hemmings, a veteran of the Sydney dining scene, having opened more than a dozen venues in his time is now the proprietor of the multistoried beachside Manly Greenhouse. But the staff shortage cruelling the industry’s potentially record summer, has forced him to close all but one level, the fine-dining first floor.

“Not only can’t I get wait staff, I can’t get dish washers or security staff,” he says.

Manly Greenhouse: demand is not the problem

A key reason has been the dramatic effect of international border closures on an industry which relies on migrant workers for up to half of staff, according to Hemmings.

“Clearly the border closures have changed the labour markets for those industries here they have an over-representation of migrants, particularly migrants on a temporary basis,’ Henry Sherrell, a policy analyst at the Grattan Institute.

“Before Covid in December 2019 we had 145,000 backpackers in the country. Today it’s less than 30,000. So that’s a pretty decent drop-off.”

Restaurant and hotel owners and managers who spoke to MWM estimated that they have been forced to jack up wages by at least 20% to compete with other unskilled and semi-skilled jobs.

The ultra-tight labour market has seen local staff, many of them permanent migrants, drift into other jobs as restaurants, cafes and hotels have been forced to close their doors – or at least dining rooms – due to the pandemic.

In Sydney, Potts Point-based private chef Margot Renton, who caters for wealthy clients’ dinner parties and functions in their homes, sums up the consensus: “Every chef I know working has gone to other jobs: tree lopping, childcare, where the pay is as good and the conditions are much better.” 

It’s the same story in regional Australia, especially in areas attracting unprecedented waves of tourists desperate to get out of big cities that have been locked down for months.

Even Ned Kelly can find staff

Ned Kelly, owner and licensee of Kelly’s Hotel in the NSW central west town of Mudgee, owns six hotels between Old Bar on the mid north coast and his hometown. He estimates that he is facing a shortfall of 30% of his 175 staff across the group.

“It’s not just at the bottom level, this business is a skills pyramid, but at the management level. We have found ourselves having to move good people around our hotels and while necessary it’s uneconomic,” he says.

Tony Brown, who runs friendly rival The Lawson Park Hotel says: “I have just enough staff but absolutely no back-up. Not only is this a problem when people are off sick or on holidays, it builds up the workload for everyone so they are risking burnout.”

Liveable Income Guarantee: a rich country can do better

There’s a similar problem for Jodie Evans, who owns the Crackenback Farm Guesthouse  between Jindabyne and Thredbo.

“I have six rooms and a 60-seat restaurant,” she says. ”At the moment I’m in a situation where I don’t know what days I’m going to be open the week after next. I might get somebody, which means I can add an extra day or I can take an extra 10 people. But at the moment, I can only open three nights a week and do 25 people because I’ve only got three other staff when I need 10.”

Jodie Evans

This is a typical story, according to Sherrell. “​Most places will have to settle for lower output. They’ll be open for fewer hours. They won’t be able to serve as many customers.”

The fight for labour in the sector has become one of the big end of town – the large hotel groups and corporate restaurant groups  – versus small business owners. Similarly to other sectors across the country it’s the corporates who have the financial muscle to outspend their smaller rivals.

“The major hotel chains are poaching chefs, young chefs with little experience and boosting their pay by 30-40% because they have to offer food but they can make up at least some of the short fall by raising room rates. That’s something we can’t do and people will only pay so much for a meal, even at a high end restaurant.”

Sydney celebrity restaurateur Neil Perry recently stated that he was paying dish washers $90 per hour to keep his city bistro Rockpool Bar & Grill open.

As far as Hemmings is concerned, those comments were irresponsible. “Now I have my dish washers showing my managers copies of the stories and demanding massive pay rises.” 

A good time for school-leavers

Restaurant groups such as Hemmes in Sydney and high-end eateries in Melbourne are offering a mix of cash bonuses to staff who bring in new recruits – topped up when the new employees have stayed for six months – and airfares to attract people both interstate and internationally,

In regional areas it’s mining and infrastructure projects that are snapping up hospitality industry staff.

Mudgee’s booming winery-based tourist industry sits side by side with the Upper Hunter Valley coal mines. Indeed Kelly says most of his pubs are near mines that can pay as much as 100 per cent more for unskilled and semi-skilled labour. While JobKeeper kept his hotels afloat, more recently he has seen long-term staff leave.

“So not uncommon for staff  to take the better offer – the  job comes up to drive a truck for 120 grand and you’re in a pandemic and you still got rent, can you blame them?” The problem he faces is that most are not coming back. 

In the Snowy, Evans says it’s the federal government’s $5 billion Snowy 2.0 scheme that is employing young people who would previously have worked in and around the ski fields, especially in the summer season.

”It’s taken a huge amount of the casual workforce out of the equation. Right now I am cleaning rooms in the morning and cooking at night,” she says.

Hemmings also says that the once reliable pool of school leavers and university students who would work in the industry is no longer there.

“Young people and students are living at home longer so they don’t need to pay the rent. And the general appetite to work in an industry where the labour is physical and hours often unsociable just is not there any more.” It’s a trend that Kelly and Evans have also noted, with the latter saying baldly: “No one wants to work in hospitality any more.”

Purcell agrees, arguing that it’s part of the longer term story of change and “sorts of the choices which people have and the options which they have, and it’s sort of showing up in fewer people wanting to do this other type of work.”

Exacerbating the problem is Australia’s seemingly never-ending housing boom  that is reshaping regional areas and changing the labour pool. Long-term renters are being forced out of boom towns such as Jindabyne and Mudgee as wealthy city folk purchase second homes for weekend getaways and short-term rental income. With only 12,000 residents Mudgee is now home to at least 700 bed and breakfast rooms.

Then food inflation

On top of the chronic staff shortages that have forced up wages, food inflation is quickly emerging a fresh threat to restaurant bottom lines.

The overall effect will be widespread restaurant and cafe closures, with Hemmings estimating that the rate of closures could rise to 30 per cent by February if something doesn’t give very soon.

The answer on everyone’s lips – including Canberra policymakers – to address at least some of the labour issues in the sector is border reopening and a resumption of significant immigration.

Yet while immigration has the potential to provide some much-needed relief to the sector, the devil is very much in the detail. Treasurer Josh Frydenberg made headlines this month with his announcement of a surge of migration in the New Year with 120,000 extra migrants now expected over the next two years. But as with most announcements from the Morrison government there remain more questions than answers –  and no detail.

Abul Rizvi, former deputy-secretary of the Department of Immigration, wrote recently in MWM sister publication Pearls and Irritations: “The implications of all this are that the composition of the 2022-23 program will inevitably be very different to that of 2019-20 and 2021-22 even if the overall program remains at the current 160,000.

That is quite likely given the recent comments of Prime Minister Scott Morrison, especially if the size of the program is decided in a March budget ahead of a May election. Morrison is highly unlikely to announce an increase in the program ahead of an election even if Treasury has assumed the program will be increased to 190,000 from 2023-24.

“The DHA provides no information on how the current year’s program is trending or what is happening to application and grant rates, particularly on the crucial onshore-versus-offshore split. The DHA has advised me that it doesn’t have planning levels for the split.”

The Grattan Institute’s Sherrell also warns of the dangers of introducing special visas to cope with sectoral labour shortages.

Will backpackers come back?

“What we need to be careful about is that when we decide to have a minimum wage, and we decide that it should be enforced, where there are instances where it’s not enforced, because of visa policy, and because of trade policy decisions, then that’s a clear tension,” he says.

“We  need to think carefully about where those tensions are, and how we can best manage these questions. And the new agricultural visa is a case in point – there is a big risk that the agricultural visa will lead to more exploitation in the context of underpaying workers. And if you believe that the minimum wage should be paid, and that the minimum wage should be enforced, then that’s a risk.”

Evans is concerned that despite borders being flung open and backpackers allowed to return – the most immediate solution –  that they may choose to go elsewhere.

“They’re not going to come back for a while, because if they decide tomorrow that international backpackers can come back, it’s going to take a good year until the country sorts. SO they can go to Uluru they can go to Queensland, they can go anywhere without having to worry about border changes

“People won’t want to spend their two years backpacking life in Australia like they used to, because it’s too hard. So we are royally f—ed.”

Notwithstanding the pain for small business, the good thing is the labour-boot is finally on the other foot; workers have the leverage, and the bleak outlook for school-leavers struggling on low wages has turned into a broad array of job choices and rising pay.

Michael Sainsbury is a former China correspondent who has lived and worked across North, Southeast and South Asia for 11 years. Now based in regional Australia, he has more than 25 years’ experience writing about business, politics and human rights in Australia and the Indo-Pacific. He has worked for News Corp, Fairfax, Nikkei and a range of independent media outlets and has won multiple awards in Australia and Asia for his reporting. He is a fierce believer in the importance of independent media.

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