So much about the world is changing, but one thing remains painfully, blatantly consistent: corporations care infinitely more about their profits than the workers who create those profits, especially in the restaurant industry.
What’s shifting is American workers who are no longer willing to put up with the exploitation. For example, over a million workers have left the lowest-wage workforce — the restaurant industry. And because Black workers have suffered from lower tips and higher rates of harassment and hostility during the pandemic, they’ve left the restaurant industry at three times the rate of white workers. Some restaurants are responding by raising wages and mobility; others, like Applebee’s, are resisting change every way they can — and will ultimately fail for doing so.
Workers are leaving in part because it costs more to get to work than what they earn when they get to work. Rising gas prices and inflation in general impact all Americans, but they have been especially painful for low-income Americans. Estimates are that many low-income households were already spending as much as one-fifth of their income on gas a year ago, so when prices climb, they squeeze low-income families disproportionately more than everyone else.
Gas price impacts are also racialized. For instance, Black households spend a higher share of their money on gas compared to their white counterparts. Our nation might respond to this crisis with subsidies for low-income workers to defray transportation costs, or higher wages, to make up for the enduring injustice of this inequality. But the corporations that dominate the low-wage service industry have a different plan — use it as a mechanism to force low-wage workers to accept poverty wages.
Recently, a leaked memo circulated written by Wayne Pankratz, an executive at an Applebee’s franchise conglomerate that owns and operates dozens of the chain’s restaurants across the Midwest. Pankratz apparently saw rising gas prices as a way to force workers to take jobs at lower wages, writing:
“Most of our employee base and potential employee base live paycheck to paycheck. Any increase in gas prices cuts into their disposable income. As inflation continues to climb and gas prices continue to go up, that means more hours employees will need to work to maintain their current level of living.”
According to the memo, this was an opportunity not only to address the historic staffing crisis facing the restaurant industry — which, with 10% of jobs unfilled, is higher than the national average — but to do so by cutting wages, since impoverished workers would be extra desperate.
The leaked email was very telling. First, it showed that Applebee’s is as desperate to find staff as every other restaurant company, but is looking for any way to avoid raising wages as many other restaurants are doing now. Second, the memo demonstrated how completely out of touch these chain restaurant executives are with the realities of their employees — the vast majority of workers report that they are leaving the restaurant industry because wages are too low to cover costs like transportation to get to work; increasing gas prices will be more likely to keep these workers home, not drive them to earn an hourly wage that is less than the cost of a gallon of gas.
The franchise corporation fired Pankratz and Applebee’s disavowed his memo. Problem solved, right? Not exactly. Bucking the nationwide trend in which responsible small business owners are increasing wages to attract workers and begin to address the historically monumental wage inequality in our nation, companies like Applebee’s and other corporate members of the National Restaurant Association have continued to resist actually raising wages despite their own massive staffing crisis. They have continued to lobby Congress to stagnate wages. Because of their influence, our country still has a subminimum wage for restaurant workers, which is $2.13 an hour at the federal level, and has not gone up a single penny in over 30 years. The subminimum wage forces customers to pay the majority of restaurant workers’ wages through their tips.
This policy has led to rampant sexual harassment and racial discrimination in the industry, because when the customer is paying your wages, the customer is always right. Black restaurant workers in particular have even lower take-home pay than white workers because of the subminimum wage and discrimination in tipping. And those dynamics have only become worse during the COVID–19 pandemic; 75% of tipped restaurant workers report their tips have gone down during the pandemic and 54% report harassment at work has gone up.
This is why more than half of the restaurant workforce say they are leaving the industry and will only return if they receive One Fair Wage — a full, livable wage with tips on top. Restaurant workers overwhelmingly support One Fair Wage and the seven states that have adopted One Fair Wage — as diverse as California, Montana and Minnesota — have seen higher industry sales growth and even higher rates of tipping. Last year, an executive at Denny’s even admitted to shareholders that One Fair Wage is good for business.
But Applebee’s and other National Restaurant Association members continue to resist actually raising wages and lobby to maintain subminimum wages. And last year when Applebee’s hosted a nationwide hiring day, they didn’t address the pittance wages they were offering people being asked to put their lives at risk as essential workers during a deadly pandemic. Instead, Applebee’s offered coupons for a free appetizer.
Americans are leaving the service industry in record numbers because of systemically low wages. The responsible, just and highly overdue response is to raise wages so that in the richest country in the world there is never again a category of people who are the “working poor.” Applebee’s, among the many restaurant corporations that received government bailouts during the pandemic, reported that financial assistance increased their profits last year. But these companies stubbornly and disgustingly remain committed to keeping worker wages as low as possible or even cutting them more. It’s a systemic injustice in our nation that firing one executive or handing out mozzarella stick coupons doesn’t remotely begin to change.
Saru Jayaraman is the co-founder and President of One Fair Wage, Director of the Food Labor Research Director at UC Berkeley and author of One Fair Wage: Ending Subminimum Pay in America (New Press, 2022).