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Ray Kelley - Navigating the Minimum Wage Dilemma - October 2023

Navigating the Minimum Wage Dilemma: Labor Costs vs. Labor-Saving Technologies in the Restaurant Industryby Ray Kelley, SVP & Partner, Wray Executive Search The restaurant industry finds itself caught between the growing calls for higher minimum wages, and the financial incentives for restaurant owners to invest in labor-saving technologies. As demands for increased wages intensify, the industry is navigating a delicate balance between meeting labor costs and embracing automation and innovation. Are there solutions to bridge the gap between these two seemingly conflicting forces? The Push for Higher Minimum Wages Living Wage Advocates: Supporters of raising the minimum wage argue that it is a matter of economic justice. They contend that no one should be expected to work full-time and still live in poverty. Cost of Living: Proponents argue that the current federal minimum wage does not align with the rising cost of living, especially in major cities, making it challenging for restaurant workers to make ends meet. Employee Well-Being: Advocates stress that a higher minimum wage can lead to improved living conditions, better health, and greater overall well-being for restaurant employees. The Case for Labor-Saving Technologies Operational Efficiency: Labor-saving technologies, such as automated ordering kiosks, kitchen robotics, and AI-powered customer service, can significantly improve operational efficiency. These innovations reduce the need for human labor, and can streamline service. Consistency and Precision: Automation can reduce errors, ensure consistent quality, and enhance the overall customer experience. This can lead to increased customer satisfaction, and repeat business. Labor Cost Reduction: From a financial standpoint, investing in automation can help restaurant owners reduce labor costs, which often represent a substantial portion of expenses. Tensions and Challenges Labor vs. Technology: The tension between the demand for higher wages and the financial incentive to invest in technology raises significant dilemmas for restaurant owners. Impact on Jobs: Embracing labor-saving technologies can lead to concerns about job displacement within the restaurant workforce, especially among entry-level employees. Rising Costs: Higher minimum wages can place added financial pressure on restaurant owners, pushing them to explore cost-cutting measures such as reducing staff or implementing technology. Finding Common Ground Training and Upskilling: Investing in training and upskilling programs for employees can help them transition to roles that complement automation, such as overseeing automated systems and providing enhanced customer service. Hybrid Models: Exploring hybrid models that combine technology and human labor can provide the best of both worlds, enhancing efficiency while maintaining a human touch in customer service. Regulatory Flexibility: Policymakers may need to consider flexible regulations that account for the unique challenges and opportunities presented by technology in the restaurant industry. Wage Transparency: Transparency in wage structures and a commitment to fair compensation can help ease the tensions between workers and restaurant owners. The tensions between demands for higher minimum wages and the financial incentives for restaurant owners to invest in labor-saving technologies underscore the need for thoughtful and strategic decision-making. Our industry faces an opportunity to find common ground that benefits both employees and businesses. Striking the right balance between labor costs and innovation is a piece to ensure the future sustainability and success of the industry. The path forward may be challenging, but it also holds promise for more efficient, profitable, and equitable restaurants.

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