President-elect Joe Biden on Thursday revealed plans for a wide-ranging $1.9 trillion stimulus, including key measures for restaurants, especially on the labor front. As part of the relief package, Biden called on Congress to pass a $15 per hour minimum wage. The federal rate has held at $7.25 for more than a decade. Biden’s Thursday proposal would also end tipped minimum wage and sub-minimum wage for people with disabilities—all goals he ran on throughout his campaign.
Many states and localities raised wage floors in recent years, including Florida’s Amendment 2, approved just this November, which outlines an increase from $8.56 to $15 by September 30, 2026.
It was not clear if the $15 change would be abrupt or phased in over time. Restaurants will be paying close attention regardless.
In 2019, the Congressional Budget Office released a study that suggested raising the federal figure to $15 an hour by 2025 would increase the pay of at least 17 million people. Yet it would also cost 1.3 million Americans their jobs.
And given the cyclical, seasonal nature of restaurant labor, and prevalence of part-time employees, operators would fall square into the debate.
Economists from Miami and Trinity Universities conducted a study the previous year that showed hiking minimum wage would disproportionately impact entry-level positions where unemployment rates are the highest.
According to the Bureau of Labor Statistics, about 40 percent of employees in restaurants and bars work part time, which is more than twice the proportion for all other industries. Also, 1.7 million teens worked in restaurants in 2018. And to accentuate the entry-level point, from 2010–2017, restaurants accounted for one out of every seven new jobs, according to The Wall Street Journal.
Yet proponents of a higher minimum wage believe it could stem turnover and narrow racial and gender pay gaps more broadly. It would almost surely, however, result in restaurants raising menu prices, cross-training positions to create leaner labor models, reducing staffing, and turning to more automation, from kiosks to robotics to AI and predictive technology.
"No one working 40 hours a week should have to live below the poverty line," Biden said Thursday. He also cited Florida's ability to get the measure passed as evidence the country is ready to move forward.
Sean Kennedy, executive vice president of public affairs at the National Restaurant Association, said the organization lauded Biden’s “laser-focus” on defeating the pandemic and restoring families and businesses devastated over the past 10 months.
“But when it comes to the restaurant and foodservice industry, the Biden plan may cause more harm than good,” he said in a statement.
“The support in the proposal is overshadowed by the possibility that, at a time when restaurants are spending more to keep their doors open, they may also have to balance a dramatic hike in labor costs,” Kennedy said. “As the pandemic has highlighted, the economic realities of each state are very different. A nationwide increase in the minimum wage will create insurmountable costs for many operators in states where restaurant jobs are most needed for recovery. And the elimination of the tipped wage could lead to thousands of skilled hospitality workers seeing cuts in their hourly income. Changes in wage policy should be considered by Congress on a separate track from an economic recovery plan.”
“The pandemic is fundamentally changing the foodservice industry and we still don’t know how it will look or how much of it will survive," the statement continued. "The National Restaurant Association and our members are ready to have a conversation about wage levels in the foodservice industry and the impact any change would have on the economic recovery of both workers and restaurant operators. We look forward to working with the incoming Biden Administration and the new Congress to find solutions that can best fuel America’s revival.”
Biden’s stimulus plan proposed $1,400 one-time checks to households, to get the $600 previous send up to $2,000. The new payments would go to adult dependents left out of earlier rounds, like some children over the age of 17. And it also includes households with mixed immigration status.
It would provide emergency paid leave to 106 million Americans and extend tax credits to many families to offset up to $8,000 in annual childcare costs (more on this later).
Notable for restaurants as well, Biden touted an unemployment insurance supplement of $400 per week. He asked Congress to extend emergency unemployment programs through the end of September (they were set to expire in mid-March). That’s $100 higher, per week, than the December stimulus, which offered $300 for 11 weeks. It’s lower, though, than the $600 weekly benefit included in the March package.
Biden’s proposal applies to those in the Pandemic Emergency Unemployment Compensation program who have exhausted regular state jobless payments and in the Pandemic Unemployment Assistance program, which provides benefits to the self-employed, independent contractors, gig workers, and certain people affected by the pandemic. The length is the big kicker, though. As noted, the December package only provided an additional 11 weeks of support. This runs through September.
While $200 less, it will still challenge restaurants looking to staff up amid COVID-19 stop-start realities. BTIG analyst Peter Saleh said at this week’s ICR Conference the millions of unemployed workers haven’t necessarily helped restaurants in this regard so far. A challenge that stems from the fact some individuals are opting to receive unemployment benefits rather than return to work. In addition to the possibility they might be making more not working than returning to a restaurant, where long-term opportunity isn’t the carrot it might be in some other industries (back to the part-time prevalence). Saleh said operators more recently have also struggled to effectively staff restaurants due to coronavirus exposure among their own employees.
Roughly 20.6 million Americans were receiving some kind of jobless aid through November 28, 2020. About 885,000 people filed for unemployment for the first time the week ending December 12, 2020, the highest weekly number since early September.
Darden CEO Gene Lee said at the conference many employees appear to have been absorbed into other sectors. This could be an after-shock of restaurants not being allowed to reopen in certain markets, or being seen as unsafe places to work due to stiff mandates.
Black Box Intelligence said the weak labor market has fueled an environment in which wage pressures softened for frontline team members in quick-service restaurants. Average hourly wages for frontline employees remained flat year-over-year at the national level during the Q3. Meanwhile, full-service cooks saw average hourly wages increase rapidly, the company said.
Essentially, back-of-house positions, which were already harder to fill before the pandemic, seem to require additional pay to attract and retain talent in this environment. That’s something that will challenge counter-service brands across the board.
Industry-wide, however, operators agree curbing the COVID-19 crisis is the only true path to long-term viability. And Biden’s plan takes direct aim at doing so.
Called the “American Rescue Plan,” it calls for investing $20 billion in a national vaccination program, which would create community vaccination centers nationwide and mobile units. Biden said he would also boost federal support to vaccinate Medicaid enrollees and invest $50 billion in testing, including funds to purchase rapid tests, expand lab capacity, and help schools implement regular testing. The deal funds the hiring of 100,000 public health workers and addresses health disparities by expanding community health centers and health services on tribal lands. Long-term care facilities would receive support to combat outbreaks. Prisons would receive funding for mitigation strategies as well.
Biden included rental assistance and eviction moratorium in the plan. The stimulus provides $25 billion in rental assistance for low- and moderate-income households who have lost jobs during COVID-19. It stacks on $25 billion put forth in December. Additionally, $5 billion would go toward helping renters pay utility bills, and $5 billion would help states and localities assist those on the verge of going homeless.
If passed, the federal eviction moratorium, set to expire by February, would extend to September 30. People with federally guaranteed mortgages would be allowed to apply for forbearance until September 30 as well.
Biden called to extend the 15 percent increase in food stamp benefits through September. It was set to flame out in June. He would also invest $3 billion to help women, infants, and children secure food, with U.S. territories receiving $1 billion in nutrition assistance.
Here, Biden referenced restaurants, saying he would partner with operators to provide food to needy Americans and jobs to laid-off restaurant workers.
Biden also asked Congress to create a $25 billion emergency fund and add $15 billion to an existing grant program to aid childcare providers. This includes family childcare homes. Funds would go toward rent, utilities, payroll, and PPE costs. The stimulus promises to expand the childcare tax credit for one year so families can get back as much as half of their spending on childcare for children under age 13.
If passed, it would also boost the Child Tax Credit for a year to $3,600 for children under 6 an $3,000 for those between ages 6 and 17. This would be fully refundable. Biden proposed to raise the maximum Earned Income Tax Credit for a year to close to $1,500 for childless adults, increase the income limit for the credit to about $21,000, and expand the age range of eligibility to cover older workers.
Biden said he wants to increase and expand the Affordable Care Act’s premium subsidies so enrollees don’t have to pay more than 8.5 percent of their income for coverage, and for Congress to provide $4 billion for mental health and substance use disorder services and $20 billion to meet veteran health care needs.
The stimulus would reinstate paid sick and family leave benefits that expired at the end of December. They would push to September 30. It would broaden the benefit to workers employed at businesses with more than 500 employees and less than 50, as well as federal workers excluded the first time around. People who are sick or quarantining, or caring for a child whose school is closed, would receive 14 weeks of paid leave.
Biden’s plan would reimburse employers with fewer than 500 workers for the full cost of providing leave.
In addition to the Paycheck Protection Program, $15 billion would funnel a new grant program for small business owners. And the government plans to infuse a $35 billion investment in some state, local, tribal, and non-profit financing programs that make low-interest loans and provide venture capital to entrepreneurs.
States, local, and territorial governments would receive $350 billion to keep frontline workers employed, distribute the vaccine, increase testing, reopen schools, and maintain vital services. The plan gives $20 billion to public transit agencies and provides an additional $170 billion to K–12 schools, colleges, and universities to help them reopen and operate safely. Congress previously approved $82 billion in aid for schools.
“It is clear President-elect Biden wants to take action to address the unique devastation the pandemic brought to America’s independent restaurant and bar community,” the Independent Restaurant Coalition said in a Thursday statement. “We are encouraged by President-elect Biden’s repeated and outspoken support for direct aid to independent restaurants and bars, especially as we remain one of the only industries seeing shrinking employment and closed doors across the country.”
“President-elect Biden’s plan opens the door for Congress to pass the bipartisan RESTAURANTS Act and ensure America's second largest employer gets the grants they need to fully reopen and secure 11 million jobs,” the organization added. “Unsustainable debt, cold weather, and a surging pandemic have left many restaurants and bars out of options this winter. We are optimistic the new administration and Congress can quickly work together to protect local restaurants and bars from permanently closing with a new stimulus package.”
Biden said in the plan he wanted “to make sure that restaurants, bars, and other businesses that have suffered disproportionately have sufficient support to bridge to the recovery.”
Restaurants and bars have lost over 2.4 million jobs since COVID-19’s onset. December saw the greatest net loss of jobs for these businesses since April, and unemployment in “Leisure and Hospitality” remains 157 percent higher than the national average.
“We appreciate the targeted support for our industry and look forward to learning more about the president-elect’s plan," the Association's Kennedy said. "We urge the Administration to consider greater inclusion of initiatives like the Senate version of the RESTAURANTS Act. Working together, this country can stop the growing number of shuttered restaurants and the millions of workers still without jobs.