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    Chipotle Agrees to Pay Over $20 Million to Settle New York City Workplace Case

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    New York City said Tuesday that it had reached a settlement potentially worth more than $20 million with the fast-food chain Chipotle Mexican Grill over violations of worker protection laws, the largest settlement of its kind in the city’s history.The action, affecting about 13,000 workers, sends a message “that we won’t stand by when workers’ rights are violated,” Mayor Eric Adams said in a statement.The city said the settlement covered violations of scheduling and sick leave laws from late November 2017 to late April of this year. Under the settlement, hourly employees of Chipotle in New York City will receive $50 for each week that they worked during that period. Employees who left the company before April 30 will have to file a claim to receive their compensation.The Fair Workweek Law enacted by the city in 2017 requires fast-food employers to provide workers with their schedules at least two weeks in advance or pay a bonus for the shifts.The employers must also give workers at least 11 hours off between shifts on consecutive days or get written consent and pay them an extra $100. And the employers must offer workers more shifts before hiring additional employees, to make it easier for them to earn a sustainable income.Under a separate city law, large employers like Chipotle must provide up to 56 hours of paid sick leave per year.The city accused Chipotle of violating all these policies.“We’re pleased to be able to resolve these issues,” Scott Boatwright, the company’s chief restaurant officer, said in a statement. Mr. Boatwright added that the company had carried out a number of changes to ensure compliance with the law, such as new time-keeping technology, and that Chipotle looked forward to “continuing to promote the goals of predictable scheduling and access to work hours for those who want them.”The city filed an initial legal complaint in the case, involving a handful of Chipotle stores, in September 2019, then expanded the case last year to include locations across the city. At the time, the city said the company owed workers over $150 million for the scheduling violations alone. Advocates for the workers said civil penalties could far exceed that amount.In addition to as much as $20 million in compensation, Chipotle will pay $1 million in civil penalties. A city spokeswoman said the settlement was the fastest way to win relief for workers.The city said in its statement that it had closed more than 220 investigations and obtained nearly $3.4 million in fines and restitution under the scheduling law, and that it had closed more than 2,300 investigations and obtained nearly $17 million in fines and restitution under the sick leave law. Neither figure includes the settlement announced Tuesday.The city spokeswoman said the city had filed more than 135 formal complaints under the two laws, and that many employers settle before the city can file a case.Chipotle faces pressure over its labor practice on other fronts. Local 32BJ of the Service Employees International Union, which helped prompt the investigation at Chipotle by filing initial complaints in the case, is seeking to unionize Chipotle workers in the city.Chipotle employees at stores in Maine and Michigan have filed petitions for union elections. The Maine store has been closed, a move that the employees assert was retaliation for the organizing effort. Chipotle has said the closing was a result of staffing issues and had “nothing to do with union activity.” More

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    Food Companies, Long Symbols of the West in Russia, Pause Operations

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    After years of cultivating the Russian market, McDonald’s, Starbucks, PepsiCo and Coca-Cola said they would temporarily close locations or stop selling products there.When McDonald’s opened its doors in Moscow’s Pushkin Square in 1990, it was welcomed by more than 30,000 Russians who happily waited hours in line, eager to spend a sizable chunk of their daily wages for a taste of America.Through burgers and fries, a food diplomacy was forged, one that flourished over the past three decades as corporations like McDonald’s and PepsiCo, private investment firms, and individuals plunged billions of dollars into building factories and restaurants to bring food, culture and good-old American capitalism to Russia. It was perestroika and glasnost sandwiched between two buns.“McDonald’s was more than the opening of a simple restaurant,” Marc Carena, a former managing director of McDonald’s Russia, told Voice of America in 2020 when the Golden Arches celebrated the 30th anniversary of its first location in what was the Soviet Union. “It came to symbolize the entire opening of the U.S.S.R. to the West.”But Russia’s invasion of Ukraine has changed everything, and food companies and restaurant chains have struggled with how to respond. Amid mounting pressure to act, McDonald’s announced on Tuesday that it was temporarily closing its nearly 850 locations in Russia and halting operations in the country.“In the 30-plus years that McDonald’s has operated in Russia, we’ve become an essential part of the 850 communities in which we operate,” Chris Kempczinski, the company’s chief executive, said in a statement announcing the move. He noted that the company employed 62,000 people in the country.Soon after the McDonald’s announcement, other prominent food companies and restaurants followed. Starbucks said it, too, was closing all of its locations in Russia, where they are owned and operated by the Kuwaiti conglomerate Alshaya Group. Coca-Cola said it was halting sales there.And PepsiCo, whose products have been in Russia since the early 1970s, said it would no longer sell Pepsi and 7-Up there but would continue to produce dairy and baby food products in the country as a “humanitarian” effort and to keep tens of thousands manufacturing and farm workers employed.Investors, as well as social media users, have been applying pressure on businesses to pull out of Russia, especially fast-food chains, which have been criticized for lagging behind other companies with decisions about their Russia operations.For food companies that have spent decades cultivating the Russian market, the act of pausing or ceasing operations in the country is complex. It involves unwinding often byzantine local supply and manufacturing chains, addressing the fates of tens of thousands of Russian employees, and untangling close ties with Russian banks, investors and others that allowed them to flourish all these years.Russian operations make up only 3 percent of McDonald’s operating income but 9 percent of its revenue. Likewise, Russia accounts for $3.4 billion, or 4 percent, of PepsiCo’s annual revenue of $79.4 billion. The company says on its website that it is the largest food and beverage manufacturer in Russia. It owns more than 20 factories in the country.“PepsiCo has been there forever. PepsiCo was there under Nixon,” said Bruce W. Bean, a professor emeritus at Michigan State University’s law school who, as an American lawyer in Russia, worked with companies making investments there.“Obviously, PepsiCo can walk away from the business,” Mr. Bean added. “It will hurt them, but it will hurt the Russians who have picked up the business, the Russians that distribute its product — it hurts them more.”Some companies — like Yum Brands and Papa John’s, which have hundreds of restaurants bearing their names across Russia — most likely have less control over whether those restaurants close because many are owned by individuals or groups of investors through franchise agreements, franchise experts said.“It’s messy,” said Ben Lawrence, a professor of franchise entrepreneurship at Georgia State University. As long as the franchisees are meeting the requirements under their agreement and paying the royalty fees, it’s hard to tell them to shut down, he said.Yum, which owns KFC and Pizza Hut, said on Tuesday that it was suspending operations at 70 company-owned KFCs and all 50 franchise-owned Pizza Huts in Russia. (The vast majority of the 1,000 KFCs in Russia are franchise-owned and, at this time, not part of these suspensions.) Yum also said it would suspend all “investment and restaurant development” in Russia and divert any profits from the region to humanitarian efforts.McDonald’s, which has invested millions of dollars into building restaurants in Russia and is a symbol of American culture, has felt the impact of geopolitics before. In 2014, when the United States and other nations imposed economic sanctions on Russia over its annexation of Crimea, the authorities suddenly closed down a number of McDonald’s locations in Russia, including in Pushkin Square, citing sanitary conditions. The Pushkin Square location reopened 90 days later.The line of customers in Moscow when McDonald’s opened its first location in the Soviet Union in 1990.Vitaly Armand/Agence France-Presse — Getty ImagesFor the better part of the last two decades, Russia has been one of the fastest-growing markets for American brands, particularly fast-food chains. McDonald’s, KFC, Subway and others thrived not only because they were a midday glimpse of Western civilization but also because they were relatively cheap places to grab a meal.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    Starbucks Workers in Mesa, Ariz., Vote for Union

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    The victory was the union’s first outside Buffalo and appeared to underscore its momentum in organizing company employees across the country.First they won in Buffalo. Now they’ve scored a victory on the other side of the country.On Friday, the National Labor Relations Board announced that workers at a Starbucks in Mesa, Ariz., had voted 25 to 3 to unionize, with three challenged votes. The result brought the number of company-owned stores with a union to three, out of roughly 9,000 nationwide.The victory was the first for the union since two stores voted to unionize in Buffalo in December, but it could mark the beginning of a larger trend. More than 100 Starbucks stores across more than 25 states have filed petitions for union elections, most of them since that first victory. The next tally will probably come from three more stores in the Buffalo area, where votes have already been cast. Starbucks workers in cities including Boston, Chicago and Seattle are scheduled to vote or are likely to vote in the coming months.“This is another historic moment for Starbucks partners and service industry workers across the country,” Michelle Hejduk, a shift supervisor at the store, said in a statement. “This movement started in Buffalo, and we’ve now brought it across the country.”Reggie Borges, a Starbucks spokesman, said in a statement that the company’s position had not changed. “As we have said throughout, we will respect the process and will bargain in good faith guided by our principles,” he said, adding: “We hope that the union does the same.”Lawyers who advise companies on labor relations said Workers United, an affiliate of the Service Employees International Union, appeared to have considerable momentum in organizing Starbucks workers.“Clearly the work force is very sympathetic to what the union is selling,” said Brian West Easley, a management-side lawyer with Jones Day. “Right now, they probably rightfully believe they have the upper hand, given the number of petitions filed each week.”The company has generally sought to challenge the union store by store, contesting the voting pool for each election before the labor board and sending company officials to cities where workers have filed for elections, partly to share its concerns about unionizing. The challenges delayed the counting of votes in Mesa and the second round of Buffalo stores.But Mr. Easley argued that it would become more difficult for Starbucks to sustain that approach if the company continued to suffer defeats, especially as the number of stores filing for elections increases.“The bigger this gets, the more stretched resources become and the more ineffective they become,” he said. “The ability to push back is eroding as the numbers increase.”At least one prominent Starbucks investor echoed that concern, arguing that the company appeared to be wasting money in its efforts to resist the union. “The company is devoting quite a bit of time and money to putting forward these arguments in front of the N.L.R.B.,” said Jonas Kron, the chief advocacy officer of Trillium Asset Management, which makes investments to further environmental, social and governance goals and had a roughly $43 million stake in Starbucks at the end of last year. “It doesn’t feel like they’re using investor resources — stakeholder resources — that well.”Mr. Kron and Trillium have urged the company to take a neutral stand toward the union. Other labor experts suggested it may eventually be forced to do so whether it wants to or not.“I’m sure there will be a tipping point at some point,” said Amy Zdravecky, a management-side lawyer at Barnes & Thornburg. “How many losses do you have before you change strategy?”Ms. Zdravecky added that the union’s ability to win an election in a state not normally sympathetic to organized labor suggested that the campaign had staying power, and that one risk for Starbucks’s approach to opposing the union is that it could begin to alienate the company’s liberal-leaning customer base.“Fighting unions may not align with where they want to be elsewhere,” she said.Many of the issues that workers in Mesa cited in their decision to support the union were similar to those identified by workers in Buffalo, like staffing and Covid-19 safety. Liz Alanna, a shift supervisor at the store, said that customers sometimes waited 45 minutes last fall after submitting a mobile order because there were not enough baristas to handle the volume. “The lobby would be full of people waiting,” Ms. Alanna said. .The Mesa campaign had an additional subplot that raised the stakes for workers. In early October, the store’s manager, Brittany Harrison, was found to have leukemia. The company initially appeared to rally behind her, Ms. Harrison said in an interview, but its posture later changed.“I’d reach out to the district manager and it would go to voice mail or ring forever and she wouldn’t call back,” she said. Ms. Harrison, and other workers like Ms. Alanna, said that she repeatedly sought an assistant manager to help at the store but that none was forthcoming.The situation came to a head on Friday, Nov. 12, when Ms. Harrison became ill at the store, then put in her two-week notice. The workers at the store filed their petition for a union election the following week. “We really had an easy time moving forward,” said Ms. Alanna, citing frustration over how the company had treated Ms. Harrison. Mr. Borges said that the company had offered Ms. Harrison support throughout her time there, and that it had offered to provide an assistant manager if she went on leave, which she had yet to do. Starbucks’s approach to the union election in Mesa resembled its approach in Buffalo. The company sent a variety of officials to the store — including two new managers, at least two new assistant managers, a senior human resources official based in Colorado, a senior manager who had worked in California and a regional vice president based in Colorado.Workers said they felt the managers and other officials were partly there to monitor them. Ms. Hejduk said the new managers appeared to implement a policy in which at least one manager must be in the store at all times to “babysit,” as she put it.Ms. Hejduk said she had been told on a recent weekday morning that the store was closing and that her shift was being canceled because no manager was available to come in, even though she has a key and frequently worked in the store without a manager before the union election filing. She said the policy was relaxed after the union voting ended.In Mesa, as in at least one of the Buffalo stores, Starbucks also brought in several new workers after the election filing, who typically had spent a few weeks training at other stores. The union argued that the offsite training was meant to ensure that workers began their employment with no contact with union supporters and that the workers were brought in to dilute support for the union. The union, which argues that some of the new workers had not worked at the store long enough to be eligible to vote, won a challenge on similar grounds in Buffalo.Mr. Borges said the officials were addressing operational issues like staffing and soliciting input from workers and educating them about the risks of unionizing, though he said Starbucks respected the rights of its employees to unionize. He said that having a separate location focused on instructing new employees allowed the company to train them more efficiently, and that all of the workers who received ballots were eligible under N.L.R.B. rules. He said it was occasionally a policy to have one manager on at all times when there was new leadership in a store.The count in Mesa and at the three additional Buffalo-area stores had been held up by management challenges over a key legal issue: the proper voting pool for the union elections.In a rebuff to Starbucks, the labor relations board ruled Wednesday that stores could vote individually, rather than having to cast ballots with other stores in a geographic area. The board’s detailed ruling makes it more difficult for Starbucks to get its way on the issue elsewhere.Unions typically favor voting on a smaller scale to reduce the number of votes needed to secure a majority in at least some locations, but Starbucks has argued that stores in the same market are akin to a single unit because employees can work at multiple locations and because district managers oversee them as a cohesive group.One option for Starbucks in light of its recent defeats, said Mr. Easley of Jones Day, would be to resign itself to a union presence and position the company to minimize the union’s influence. He suggested, for example, that Starbucks might focus its opposition on cities where the union had already won, to make sure there weren’t several unionized stores that would provide it with greater leverage.“The next phase of this may be divide and conquer,” he said. “Make sure they don’t end up with voting blocks that could shut down business in a market.”He added, referring to the union: “If they can control market in a particular location, they have leverage to get Starbucks to do something.” More

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    Inflation Hits the Fast Food Counter

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    On a chilly Tuesday afternoon this month, James Marsh stopped by a Chipotle near his suburban Chicago home to grab something to eat.It had been a while since Mr. Marsh had been to Chipotle — he estimated he goes five times a year — and he stopped cold when he saw the prices.“I had been getting my usual, a steak burrito, which had been maybe in the mid-$8 range,” said Mr. Marsh, who trades stock options at his home in Hinsdale, Ill. “Now it was more than $9.”He walked out.“I figured I’d find something at home,” he said.The pandemic has led to price spikes in everything from pizza slices in Manhattan to sides of beef in Colorado. And it has led to more expensive items on the menus at fast-food chains, traditionally establishments where people are used to grabbing a quick bite that doesn’t hurt their wallet.At a Chipotle in Costa Mesa, Calif., the price of a chicken burrito — nothing fancy, hold the guacamole — about a year ago was $7.25. These days, that same burrito costs around $7.95, according to price data collected by analysts. In Ann Arbor, Mich., a ShackBurger at Shake Shack used to cost $5.69; now it’s $6.09. And in Oklahoma City, an order of 50 bone-in wings from Wingstop that cost $41.99 early last year is now $47.49, a 13 percent increase.Last year, the price of menu items at fast-food restaurants rose 8 percent, its biggest jump in more than 20 years, according to government data. And, in some cases, portions have shrunk.In Ann Arbor, Mich., a ShackBurger at Shake Shack used to cost $5.69; now it’s $6.09.Amy Lombard for The New York Times“In recent years, most fast-food restaurants had, maybe, raised prices in the low single digits each year,” said Matthew Goodman, an analyst at M Science, an alternative data research and analytics firm. “What we’ve seen over the last six-plus months are restaurants being aggressive in pushing through prices.”This comes at a time when the hypercompetitive fast-food market is booming.Chains like McDonald’s, Chipotle and Wingstop were big winners of the pandemic as consumers, stuck at home working and tired of cooking multiple meals for their families, increasingly turned to them for convenient solutions. But in the past year, as the cost of ingredients rose and the average hourly wage increased 16 percent to $16.10 in November from a year earlier, according to government data, restaurants began to quietly bump up prices.But making customers pay more for a burger or a burrito is a tricky art. For many restaurants, it involves complex algorithms and test markets. They need to walk a fine line between raising prices enough to cover expenses while not scaring away customers. Moreover, there isn’t a one-size-fits-all approach. Chains that are operated by franchisees typically allow individual owners to decide pricing. And national chains, like Chipotle and Shake Shack, charge different prices in various parts of the country.When Carrols Restaurant Group, which operates more than 1,000 Burger Kings, raised prices in the second half of last year, the number of customers actually improved from the third to the fourth quarter. “Over time, we generally have not seen a whole lot of pushback from consumers” on the higher prices, Carrols’ chief executive, Daniel T. Accordino, told analysts at a conference in early January.Menu prices are likely to continue to climb this year. Many restaurants say they are still paying higher wages to attract employees and expect food prices to rise.“We expect unprecedented increases in our food basket costs versus 2021,” Ritch Allison, the chief executive of Domino’s Pizza, told Wall Street analysts at a conference this month. While Domino’s hasn’t raised prices, it is altering its promotions — offering the $7.99 pizza deal only to customers ordering online and shrinking the number of chicken wings in certain promotions to eight from 10 — in an effort to maintain profit margins.In Oklahoma City, a bucket of 50 bone-in wings from Wingstop that cost $41.99 early last year is now $47.49.Amy Lombard for The New York TimesDespite the higher food and labor costs, some restaurants are seeing sales and profits rebound past prepandemic levels.When McDonald’s reports earnings this month, Wall Street analysts expect that its revenues will have hit a five-year high of more than $23 billion, a $2 billion increase from 2019. Net income is predicted to top $7 billion, up from $6 billion in 2019. Other chains like Cracker Barrel and Darden Restaurants, which owns Olive Garden and Longhorn Steakhouse, have resumed dividend payments or cash buybacks of stock after suspending those activities early in the pandemic to conserve cash.And next month, when Chipotle reports results for 2021, analysts expect revenues to top $7.5 billion, a 34 percent jump from 2019. Net income is expected to almost double from prepandemic levels. In the third quarter, the company repurchased nearly $100 million of its stock. Chipotle declined to make an executive available for an interview, citing the quiet period ahead of its earnings release.While Chipotle executives blamed higher labor costs for a 4 percent price increase in menu items this summer, the company has been looking for ways to boost its profitability.One way was to charge higher prices for delivery. Delivery orders through vendors like DoorDash and Uber Eats exploded for Chipotle and other fast-food chains during the pandemic. But so did the commission fees that Chipotle paid the vendors. So in the fall of 2020, it began running tests to see what would happen if it raised the prices of burritos and guacamole and chips that customers ordered for delivery, executives told Wall Street analysts in an earnings call. It essentially meant the customer covered Chipotle’s side of the delivery costs.The company discovered customers were willing to pay for the convenience of delivery. Now, customers ordering Chipotle for delivery pay about 21 percent more than if they had ordered and picked the food up in the stores, according to an analysis by Jeff Farmer, an analyst at Gordon Haskett Research Advisors.At a Chipotle in Costa Mesa, Calif., the price of a chicken burrito about a year ago was $7.25. Now it costs $7.95.Amy Lombard for The New York Times“I would say that our ultimate goal, so this would be over the long term, maybe the medium term, is to fully protect our margins,” said Jack Hartung, the chief financial officer of Chipotle, on a call with Wall Street analysts last fall. “When you look at our pricing versus other restaurant companies’ for the quality of the food, the quantity of the food, and the quality and convenience of the experience, we offer great value. So we believe we have room to fully protect the margin.”That doesn’t mean customers are thrilled about the extra costs.This month, Jacob Herlin, a data scientist in Lakewood, Colo., placed an order: a steak-and-guacamole burrito for $11.95, a Coca-Cola for $3, and chips and guacamole, which were free with a birthday coupon. The total was $14.95, before tax.But when he clicked to have the food delivered, the price for the burrito jumped to $14.45 and the soda climbed to $3.65, bringing the total to $18.10 before tax, 21 percent more than if he had picked the food up himself.There was more. Mr. Herlin was charged a delivery fee of $1 and another “service fee” of $2.32, bringing the total for the delivered meal to $23.20. He tipped the driver an additional $3.Mr. Herlin said he did not mind paying for delivery and wanted drivers to be paid a decent wage. But he felt that Chipotle wasn’t being upfront with customers about the added costs.“They’re basically hiding the fees two different ways, through that base price increase and through the hidden ‘service fee,’” Mr. Herlin said in an email. “I would very much prefer if they had the same pricing and were just honest about a $5 delivery fee.” More

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    Low-Wage Workers Now Have Options, Which Could Mean a Raise

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    The sharp rebound in hiring, especially in service industries, is widening opportunities and prompting employers to compete on pay.McDonald’s is raising wages at its company-owned restaurants. It is also helping its franchisees hang on to workers with funding for backup child care, elder care and tuition assistance. Pay is up at Chipotle, too, and Papa John’s and many of its franchisees are offering hiring and referral bonuses.The reason? “In January, 8 percent of restaurant operators rated recruitment and retention of work force as their top challenge,” Hudson Riehle, senior vice president for research at the National Restaurant Association, said in an email. “By May, that number had risen to 72 percent.”Restaurant workers — burger flippers and bussers, cooks and waiters — have emerged from the pandemic recession to find themselves in a position they could not have imagined a couple of years ago: They have options. They can afford to wait for a better deal.In the first five months of the year, restaurants put out 61 percent more “workers wanted” posts for waiters and waitresses than they had in the same months of 2018 and 2019, before the coronavirus pandemic shut down bars and restaurants around the country, according to data from Burning Glass, a job market analytics firm.That’s not all: The jobs that waiters and waitresses typically transition to — as bartenders, hosts and hostesses, chefs and food preparation workers — are booming, too.Something similar is happening all along the least-paid end of the labor market. Many employers have blamed expanded unemployment benefits for their troubles in filling gaping job vacancies. But the sharp rebound in hiring — clustered in urban service industries — is creating bottlenecks in sets of occupations that are improving prospects across much of the nation’s low-wage labor force.Marcela Escobari, Ian Seyal and Carlos Daboin Contreras of the Brookings Institution in Washington offer an occupation-by-occupation analysis of this dynamic.Of the roughly 11 million jobs lost between the first quarter of 2020 and the first quarter of this year, they found, over four million were in occupations that are bouncing back with a double benefit: Demand for workers is high, and they are launching pads for sometimes higher-paying jobs that are also growing rapidly.For instance, between January and May there were twice as many job postings for construction laborers as the average for the same five months of 2018 and 2019, according to the Brookings analysis. What’s more, painters and carpenters — two occupations that construction workers typically move to — are also awash in offers.At the same time, construction may be drawing workers from other occupations. While many contractors — especially in residential building — are desperate for workers, “trucking seems to be even more desperate,” noted Ken Simonson, chief economist of the Associated General Contractors of America. One reason might be that construction, with its high pay, tends to attract a lot of truckers.“A lot of construction workers have commercial drivers’ licenses,” Mr. Simonson added. “Trucking companies call it poaching. I would call it luring.”Building cleaners are in hot demand. But an unemployed janitor who wants something better can probably get a job as a groundskeeper, a house cleaner or a construction laborer. These are among the five occupations that building cleaners most often move to, according to the Brookings data. And they are booming, too.Something similar is happening in the market for personal care aides and nursing and home health aides, along with practical and vocational nurses, who are much better paid. All are experiencing a jump in job postings.Some two-thirds of the more than four million jobs are in occupations at the lower end of the wage structure, paying less than $17.26 an hour. The job market is booming far less for occupations paying more than $30.“What’s happening right now is not about the wages of college grads going up — it’s about the wages of lifeguards at my pool,” said Betsey Stevenson, a former chief economist at the Labor Department who is now at the University of Michigan. “That closing of the wage differential could persist.”And this might help explain the peculiar nature of the labor market’s rebound from the pandemic, in which high unemployment coexists with complaints of labor shortages.“Undergirding that is the sense that workers at the very bottom have options to work for a better job,” Ms. Stevenson said. “What employers are used to paying won’t really cut it.”More than 3 percent of workers in the private sector quit in April, according to the Labor Department. That is the highest rate since the government started collecting the data two decades ago. The rate eased only slightly in May, to 2.8 percent. And quitting is particularly notable near the least-paid tier of the labor market: 5.3 percent of workers in leisure and hospitality and 4 percent of workers in retail quit in May.A Domino’s pizza outlet in St. Louis was looking for workers last month.Whitney Curtis for The New York TimesPay seems to be responding. Wages of workers with only a high school certificate have been gaining ground on the pay of their peers with more education since the spring of last year.Might this be just a flash in the pan? Heidi Shierholz, who was also a chief economist at the Labor Department during the Obama administration and is now director of policy at the left-leaning Economic Policy Institute, is skeptical that the job market is breaking with its decades-long trend of wage stagnation at the bottom and lavish rewards at the top.“How much of what this captures is just a trampoline effect?” she wondered. “The jobs that come back tend to look like the jobs that were lost.” After the dust settles and the employment holes created by the pandemic in several industries fill up, the deal offered to workers might look much like it did before the pandemic.Ultimately, “we are stuck in a world where labor is very cheap and we don’t expect much from it,” Ms. Stevenson said. “I don’t see this pandemic fundamentally reshaping that.” Ms. Shierholz put it this way: “There has not been any fundamental restructuring of power in the economy.”Some of the more lasting changes brought about by the pandemic could work against low-wage workers. Restaurants, taxi fleets and hotels in big cities are likely to see less business as companies cut back on business travel and people working remotely cut back on downtown lunches and happy hours.More job losses should be expected if fast food joints and other service businesses decide to replace their face-to-face workers with robots and software. Yet there are signs that the country’s low-wage labor force might be in for more lasting raises.Even before the pandemic, wages of less-educated workers were rising at the fastest rate in over a decade, propelled by shrinking unemployment. And after the temporary expansion of unemployment insurance ends, with Covid-19 under control and children back at school, workers may be unwilling to accept the deals they accepted in the past.Jed Kolko, chief economist at the job placement site Indeed, pointed to one bit of evidence: the increase in the reservation wage — the lowest wage that workers will accept to take a job.According to data from the Federal Reserve Bank of New York, the average reservation wage is growing fastest for workers without a college degree, hitting $61,483 in March, 26 percent more than a year earlier. Aside from a dip at the start of the pandemic, it has been rising since November 2017.“That suggests it is a deeper trend,” Mr. Kolko noted. “It’s not just about the recovery.”Other trends could support higher wages at the bottom. The aging of the population, notably, is shrinking the pool of able-bodied workers and increasing demand for care workers, who toil for low pay but are vital to support a growing cohort of older Americans.“There was a work force crisis in the home care industry before Covid,” said Kevin Smith, chief executive of Best of Care in Quincy, Mass., and president of the state industry association. “Covid really laid that bare and exacerbated the crisis.”With more families turning their backs on nursing homes, which were early hotbeds of coronavirus infections, Mr. Smith said, personal care aides and home health aides are in even shorter supply.“The demand for services like ours has never been higher,” he said. “That’s never going back.”And some of the changes brought about by the pandemic might create new transition opportunities that are not yet in the Brookings data. The accelerated shift to online shopping may be a dire development for retail workers, but it will probably fuel demand for warehouse workers and delivery truck drivers.The coronavirus outbreak induced such an unusual recession that any predictions are risky. And yet, as Ms. Escobari of Brookings pointed out, the recovery may provide rare opportunities for those toiling for low wages.“This time, people searching for jobs may have a lot of different options,” she said. “That is not typical.” More

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    Pandemic Wave of Automation May Be Bad News for Workers

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    The need for social distancing led restaurants and grocery stores to seek technological help. That may improve productivity, but could also cost jobs.When Kroger customers in Cincinnati shop online these days, their groceries may be picked out not by a worker in their local supermarket but by a robot in a nearby warehouse.Gamers at Dave & Buster’s in Dallas who want pretzel dogs can order and pay from their phones — no need to flag down a waiter.And in the drive-through lane at Checkers near Atlanta, requests for Big Buford burgers and Mother Cruncher chicken sandwiches may be fielded not by a cashier in a headset, but by a voice-recognition algorithm.An increase in automation, especially in service industries, may prove to be an economic legacy of the pandemic. Businesses from factories to fast-food outlets to hotels turned to technology last year to keep operations running amid social distancing requirements and contagion fears. Now the outbreak is ebbing in the United States, but the difficulty in hiring workers — at least at the wages that employers are used to paying — is providing new momentum for automation.Technological investments that were made in response to the crisis may contribute to a post-pandemic productivity boom, allowing for higher wages and faster growth. But some economists say the latest wave of automation could eliminate jobs and erode bargaining power, particularly for the lowest-paid workers, in a lasting way.“Once a job is automated, it’s pretty hard to turn back,” said Casey Warman, an economist at Dalhousie University in Nova Scotia who has studied automation in the pandemic.The trend toward automation predates the pandemic, but it has accelerated at what is proving to be a critical moment. The rapid reopening of the economy has led to a surge in demand for waiters, hotel maids, retail sales clerks and other workers in service industries that had cut their staffs. At the same time, government benefits have allowed many people to be selective in the jobs they take. Together, those forces have given low-wage workers a rare moment of leverage, leading to higher pay, more generous benefits and other perks.Automation threatens to tip the advantage back toward employers, potentially eroding those gains. A working paper published by the International Monetary Fund this year predicted that pandemic-induced automation would increase inequality in coming years, not just in the United States but around the world.“Six months ago, all these workers were essential,” said Marc Perrone, president of the United Food and Commercial Workers, a union representing grocery workers. “Everyone was calling them heroes. Now, they’re trying to figure out how to get rid of them.”Checkers, like many fast-food restaurants, experienced a jump in sales when the pandemic shut down most in-person dining. But finding workers to meet that demand proved difficult — so much so that Shana Gonzales, a Checkers franchisee in the Atlanta area, found herself back behind the cash register three decades after she started working part time at Taco Bell while in high school.“We really felt like there has to be another solution,” she said.So Ms. Gonzales contacted Valyant AI, a Colorado-based start-up that makes voice recognition systems for restaurants. In December, after weeks of setup and testing, Valyant’s technology began taking orders at one of Ms. Gonzales’s drive-through lanes. Now customers are greeted by an automated voice designed to understand their orders — including modifications and special requests — suggest add-ons like fries or a shake, and feed the information directly to the kitchen and the cashier.The rollout has been successful enough that Ms. Gonzales is getting ready to expand the system to her three other restaurants.“We’ll look back and say why didn’t we do this sooner,” she said.Shana Gonzales, who owns four Checkers franchises in the Atlanta area, said she has had difficulty finding workers to meet demand.Lynsey Weatherspoon for The New York TimesThe push toward automation goes far beyond the restaurant sector. Hotels, retailers, manufacturers and other businesses have all accelerated technological investments. In a survey of nearly 300 global companies by the World Economic Forum last year, 43 percent of businesses said they expected to reduce their work forces through new uses of technology.Some economists see the increased investment as encouraging. For much of the past two decades, the U.S. economy has struggled with weak productivity growth, leaving workers and stockholders to compete over their share of the income — a game that workers tended to lose. Automation may harm specific workers, but if it makes the economy more productive, that could be good for workers as a whole, said Katy George, a senior partner at McKinsey, the consulting firm.She cited the example of a client in manufacturing who had been pushing his company for years to embrace augmented-reality technology in its factories. The pandemic finally helped him win the battle: With air travel off limits, the technology was the only way to bring in an expert to help troubleshoot issues at a remote plant.“For the first time, we’re seeing that these technologies are both increasing productivity, lowering cost, but they’re also increasing flexibility,” she said. “We’re starting to see real momentum building, which is great news for the world, frankly.”Other economists are less sanguine. Daron Acemoglu of the Massachusetts Institute of Technology said that many of the technological investments had just replaced human labor without adding much to overall productivity.In a recent working paper, Professor Acemoglu and a colleague concluded that “a significant portion of the rise in U.S. wage inequality over the last four decades has been driven by automation” — and he said that trend had almost certainly accelerated in the pandemic.“If we automated less, we would not actually have generated that much less output but we would have had a very different trajectory for inequality,” Professor Acemoglu said.Ms. Gonzales, the Checkers franchisee, isn’t looking to cut jobs. She said she would hire 30 people if she could find them. And she has raised hourly pay to about $10 for entry-level workers, from about $9 before the pandemic. Technology, she said, is easing pressure on workers and speeding up service when restaurants are chronically understaffed.“Our approach is, this is an assistant for you,” she said. “This allows our employee to really focus” on customers.Ms. Gonzales acknowledged she could fully staff her restaurants if she offered $14 to $15 an hour to attract workers. But doing so, she said, would force her to raise prices so much that she would lose sales — and automation allows her to take another course.The artificial intelligence system that feeds information to the kitchen at a Checkers.Lynsey Weatherspoon for The New York TimesTechnology is easing pressure on workers and speeding up service when restaurants are chronically understaffed, Ms. Gonzales said.Lynsey Weatherspoon for The New York TimesRob Carpenter, Valyant’s chief executive, noted that at most restaurants, taking drive-through orders is only part of an employee’s responsibilities. Automating that task doesn’t eliminate a job; it makes the job more manageable.“We’re not talking about automating an entire position,” he said. “It’s just one task within the restaurant, and it’s gnarly, one of the least desirable tasks.”But technology doesn’t have to take over all aspects of a job to leave workers worse off. If automation allows a restaurant that used to require 10 employees a shift to operate with eight or nine, that will mean fewer jobs in the long run. And even in the short term, the technology could erode workers’ bargaining power.“Often you displace enough of the tasks in an occupation and suddenly that occupation is no more,” Professor Acemoglu said. “It might kick me out of a job, or if I keep my job I’ll get lower wages.”At some businesses, automation is already affecting the number and type of jobs available. Meltwich, a restaurant chain that started in Canada and is expanding into the United States, has embraced a range of technologies to cut back on labor costs. Its grills no longer require someone to flip burgers — they grill both sides at once, and need little more than the press of a button.“You can pull a less-skilled worker in and have them adapt to our system much easier,” said Ryan Hillis, a Meltwich vice president. “It certainly widens the scope of who you can have behind that grill.”With more advanced kitchen equipment, software that allows online orders to flow directly to the restaurant and other technological advances, Meltwich needs only two to three workers on a shift, rather than three or four, Mr. Hillis said.Such changes, multiplied across thousands of businesses in dozens of industries, could significantly change workers’ prospects. Professor Warman, the Canadian economist, said technologies developed for one purpose tend to spread to similar tasks, which could make it hard for workers harmed by automation to shift to another occupation or industry.“If a whole sector of labor is hit, then where do those workers go?” Professor Warman said. Women, and to a lesser degree people of color, are likely to be disproportionately affected, he added.The grocery business has long been a source of steady, often unionized jobs for people without a college degree. But technology is changing the sector. Self-checkout lanes have reduced the number of cashiers; many stores have simple robots to patrol aisles for spills and check inventory; and warehouses have become increasingly automated. Kroger in April opened a 375,000-square-foot warehouse with more than 1,000 robots that bag groceries for delivery customers. The company is even experimenting with delivering groceries by drone.Other companies in the industry are doing the same. Jennifer Brogan, a spokeswoman for Stop & Shop, a grocery chain based in New England, said that technology allowed the company to better serve customers — and that it was a competitive necessity.“Competitors and other players in the retail space are developing technologies and partnerships to reduce their costs and offer improved service and value for customers,” she said. “Stop & Shop needs to do the same.”In 2011, Patrice Thomas took a part-time job in the deli at a Stop & Shop in Norwich, Conn. A decade later, he manages the store’s prepared foods department, earning around $40,000 a year.Mr. Thomas, 32, said that he wasn’t concerned about being replaced by a robot anytime soon, and that he welcomed technologies making him more productive — like more powerful ovens for rotisserie chickens and blast chillers that quickly cool items that must be stored cold.But he worries about other technologies — like automated meat slicers — that seem to enable grocers to rely on less experienced, lower-paid workers and make it harder to build a career in the industry.“The business model we seem to be following is we’re pushing toward automation and we’re not investing equally in the worker,” he said. “Today it’s, ‘We want to get these robots in here to replace you because we feel like you’re overpaid and we can get this kid in there and all he has to do is push this button.’” More