April 22, 2022

Are Labor Challenges Here to Stay?

by Jillian Straw

Labor challenges, particularly in the hospitality industry, have been top of mind for many business owners and operators.

The National Restaurant Association’s 2022 State of the Restaurant Industry report detailed that roughly 50% of operators across industry segments “expect recruiting & retaining employees will be their top challenge in ‘22.” Even though the industry added 1.7 million jobs back in 2021, “7 in 10 operators say they don’t have enough staff to support their current service demand.” 

These statistics line up with the day-to-day labor challenges operators have been facing for months. With no end in sight, many business leaders are leaving behind the idea of a “temporary labor crunch” and instead starting to grapple with the idea of a long-term shift in the workforce.

In this new era, employers are beginning to approach labor strategy differently. Innovations and tools that improve efficiency, like automation in operations, are going to be critical for companies to stay competitive.

Complex Root Causes of Labor Shortage

As with many macroeconomic trends, the underlying causes of the labor shortage are nuanced.

Previously, the labor shortage was attributed to a wide variety of factors. Some claimed that extra unemployment benefits kept workers at home. Reports and studies comparing states with varying benefits didn’t find a difference, however, in when people returned to the workforce. And those extended benefits ended many months ago, removing that potential explanation.

Other factors included disruptions to family life caused by school closures and homeschooling needs, as well as pressures on the childcare system that led to care shortages. Other workers faced concerns about health risks and disruptions to their commute.

Now, economists are arguing that a major factor in the general labor shortage is demographic: during our current era, the “Baby Boomer” generation is in the process of aging out of the workforce. Baby Boomers make up about 22% of the population, and about a quarter of the workforce. As this generation shifts to retirement, the effects on the economy are profound.

A review by the Federal Reserve Bank of Boston reports that comparing the current participation rate to a comparable period in late 2017, “population aging has continued to exert a strong downward pull on the participation rate, so that participation is now close to what one would expect, given the current unemployment rate and the current age structure of the population.”

While a large part of this shift is demographical, it may also have been accelerated by the pandemic. Business Insider details that researchers found “2.5 million people retired during the pandemic, and 1 million of those were early retirements”. Forbes also reports that during the early days of the pandemic, Q3 of 2020, “nearly 30 million Baby Boomers left the job market and retired… The study showed that Covid-19 heavily contributed to the rapid increase of Boomers—born between 1946 and 1964—being forced out of the labor market.”

Adapting to Changes in the Workforce

Although many news outlets used to refer to labor challenges as a “temporary labor shortage” or “labor crunch”, the data may indicate a broader, macroeconomic trend at play. 

With this in mind, while your organization may have an urgent need to continue recruiting and training, you may also want to look at the bigger picture of labor in your company. The labor market may be evolving, requiring a long-term recalibration of your strategy.

With potentially fewer workers available in the future, your business needs to adapt to a new environment. Where should you start?

Restaurant manager pauses with a tray of fresh fruit, coffee and juice, wearing a grateful, welcoming smile.

Reexamining Labor Needs

First, take a look at how your organization views labor. Many hospitality roles were traditionally considered “entry-level” in the workforce, which meant they relied upon on-the-job training and minimum wage or slightly above.

In the future, employers may need to assign more value to the labor force, both in terms of wages but also in terms of opportunities that are provided. Wages and salaries, particularly in hospitality, have steadily been increasing. In addition, benefits and other career opportunities have become more important to employees.  

Consider examining how your organization is responding to these trends in labor, particularly as it relates to “Gen Z” workers entering the labor force. These potential employees, at the start of their working life, may have different priorities than previous generations. Analysts point toward Gen Z’s emphasis on culture and community, as well as understanding how a job will give them a foundation for a career. 

Significantly, Gen Z-ers are “digital natives” that have generally had technology as part of their entire life. These workers are used to, and expect, digital processes — making them a valuable asset for your company’s tech initiatives. 

That means your organization should aggressively pursue technology as a means to empower Gen Z to move beyond entry-level tasks and towards higher-value work, leveraged with automation and AI. 

Rethinking Operations

Adapting to new labor challenges isn’t just about cutting costs; it’s also about streamlining how you use your labor. Time-wasting activities across your organization use up precious resources: your available labor hours.

Taking advantage of technology innovations (explored more down below) can help make your operations more efficient overall. Focusing on productivity, and how technology can enable efficiencies, helps you get the most out of the human capital you have available.

Adding Automation

In particular, technology tools like automation are needed to create a sustainable approach to streamlined labor. Your organization needs to be able to meet labor needs now, and also in the future as your organization grows. Automation can scale, meeting current challenges and future needs.

In addition, the labor shortage means that not only has the availability of labor shrunk, but the willingness of people to do menial or manual labor like data entry is lower, too. Automation can help address labor shortages, but it can also have the added benefit of making job responsibilities more efficient and less menial. 

Matte black rotary telephone on marble table, with instructions to dial 0 for reception, 1 for room service.

Leveraging Technology to Address Labor Concerns

There are many technology tools your organization can consider to address labor issues. Some are quite simple to implement, while others may require a more dedicated effort. However, all have the benefit of not only making labor more efficient and productive, but also helping make your workplace more attractive to an increasingly tech-savvy workforce.

Here are just a few initial technologies to consider.

AP Automation

Accounts payable automation can streamline one of the most manual and time-consuming processes in your back office: documenting, organizing, indexing, and approving vendor invoices. Next-generation invoice solutions use optical character recognition and machine learning to automate workflows, increase accuracy, and open up new ways to leverage your data. By automating your AP, you can reduce the need for extensive AP training of new employees, especially if your workplace experiences high turnover in the front-of-house or back-of-house. 

Inventory Management

Inventory management software can automatically pull data from your invoice system and your Point of Sale (POS) system to create up-to-date theoretical inventory counts. Combined with your team’s manual count of actual inventory (streamlined with technology tools like custom inventory templates), you can keep a tight control on inventory levels without adding more responsibility to your team’s workload.

Automated Bill Pay

Invoice processing software can also add major efficiencies to your bill pay processes. Rather than rely on printing paper checks and stuffing into envelopes, your team can use a centralized dashboard to pay all vendors, whether through ACH transfers, virtual cards, outsourced paper checks, or individual vendor platforms. New innovations in bill pay can provide these efficiencies while also providing data transparency, increased security controls, and even cash back for your business

Scheduling Software

If your company works with many hourly employees, your labor cost and availability will depend heavily on your scheduling. Scheduling software solutions help your managers create efficient schedules, week-in and week-out, using tools like sales forecasting to predict labor needs, actual and theoretical labor usage, and overtime monitoring. 

Hiring, Onboarding, and Payroll Services

The process of hiring and onboarding new hires can consume a lot of time and resources, as well as set the tone for your new hires. Using services like a jobs portal or online paperwork for onboarding can automate tedious parts of the hiring process and make more time for things that matter, like interpersonal interactions. And as payroll regulations become more and more complex, solutions like payroll services can streamline compliance and documentation while also ensuring your employees are paid on time.

Well-lit photo of an appealing but unstaffed multi-use space with upscale bar, cafe area, and small meeting spaces.

Using Staff Time Wisely

Even if your organization is successfully meeting your labor needs at the moment, analyzing how you staff and spend your labor hours is always a priority for businesses. Reviewing opportunities to make your staff more efficient can help your bottom line in more ways than one. With the time your team gets back from technology and automation, your team can spend their time on valuable activities for your business.

Looking at the Future of Labor

As an owner or operator, you determine your company’s long-term strategy in all areas of business. Proactively staying on top of broader economic trends that impact your industry, like changes in the workforce, allows you to adjust your business strategy with new tools and resources.

Interested in adding automation to your invoice and payment processes? To see how the automated invoice process can work for your business, scroll down and request to see a demo of Ottimate.

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