Amazon was blamed for killing malls. Now its higher-paying jobs may be choking the restaurant industry’s comeback.

amazon warehouse
  • Restaurants are struggling to staff workers after laying off employees at the onset of the pandemic.
  • Amazon’s hiring spree and higher pay is eating into the US restaurant labor force, an expert says.
  • Fast-food chains are working to lure workers back with incentives, but it may not be enough.
  • See more stories on Insider’s business page.

As restaurants struggle to find workers, one expert says Amazon is partly to blame.

Amazon has long been a disruptive force in the US market. In 2016, Amazon was blamed for killing off malls and retail chains like Borders and Circuit City through its low online prices. Now, the company may be starting to eat into the food-service industry’s workforce.

The online retailer’s higher pay poses a threat to minimum wage jobs and workers are fleeing the food-service industry for roles at Amazon warehouses and other online retailers, Daniel Zhao, a senior economist at Glassdoor told Bloomberg.

At the onset of the pandemic, the restaurant industry was forced to lay off 5.9 million workers – over half of its 10.6 million-person workforce, according to federal data. While restaurants were bleeding workers, companies like Amazon went on hiring sprees, increasing its personnel at fulfillment centers by 50%. In 2020, the online retailer hired an average of 1,400 new workers a day, The New York Times reported. On Thursday, the company announced it plans to hire another 75,000 workers in the US and Canada for its fulfillment centers, as well as transportation sector.

In the wake of the COVID-19 pandemic, restaurant servers flocked to companies like Amazon. Last spring, job searches for “Amazon” from restaurant servers increased over 600% on Glassdoor, while searches for warehouse positions from the same group also increased over 200%.

Now, restaurants are developing incentives to lure workers back. At the same time, Amazon is beefing up its own hiring perks.

Jobs at restaurants are becoming increasingly less appealing for workers

At Amazon, wages start at $17 per hour, compared to minimum wage restaurant jobs which can pay as little as $7.25 per hour.

One Miami chef, Phil Bryant, told The Washington Post that Amazon’s higher pay has forced many restaurant workers to reconsider their careers paths. He said many of his former coworkers are asking themselves, “If I can make $17 per hour at an Amazon warehouse, but only $14 per hour as a line cook, a notoriously hot, stressful, intense job, why would I do that?”

Workers are also questioning the future of the restaurant industry. Bryant said workers are asking, “If this whole industry can deteriorate overnight and leave everyone unemployed, is this really stable enough to go back to?”

Amazon warehouse
The inside of an Amazon fulfillment center in Robbinsville, New Jersey on December 2, 2019.

Sylvia Allegretto, the Co-Chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley, told Insider she doesn’t see the issue as a labor shortage. She pointed out 10 million people are still unemployed in the US.

For many restaurant workers it simply isn’t worth the risk, she told Insider. Even workers that haven’t found better-paying jobs are likely hesitant to return to work due to the risk of getting COVID-19, as well as the lower operating levels at restaurants, that will likely cut into worker’s tips and overall profit.

Customer-facing jobs have become increasingly dangerous for frontline workers during the pandemic. Workers have been forced to impose mask mandates to disgruntled customers and faced significant backlash. They have also been at a higher risk of exposure to COVID-19.

Restaurant jobs can be particularly grueling. One former restaurant worker, Bettie Douglas, told Bloomberg she found relief when she quit her job at a sandwich shop and started working at Rainbow USA Inc, a clothing store that also sells merchandise online. She unpacks boxes and tags clothing now, instead of running dishes, registers, and taking orders.

The labor shortage has only exacerbated the issue, making the food industry even more strenuous by pushing workers to take on extra shifts and work short-staffed in order to compensate for the shortage. A recent survey from One Fair Wage found that over half of restaurant workers are considering quitting because of low wages, as well as outside opportunities.

“There’s been days I’ve worked 16 hours because we just couldn’t get coverage for it,” a McDonald’s manager told Insider’s Kate Taylor last month.

Many food chains are implementing incentives to compete with Amazon and lure workers back

On Monday, Chipotle announced it would raise average hourly wages from $13 to $15 by June. Other chains like McDonald’s and Taco Bell are offering signing bonuses and referral programs. One Florida McDonald’s was even paying people $50 to come in for an interview, Taylor reported.

But, even so, restaurants will struggle to compete with companies like Amazon, as the giant continues to boost pay for hourly workers. In April, Amazon boosted spending on entry level workers by $1 billion, rolling out raises to over 500,000 hourly employees. On Thursday, the retail giant boosted its incentives, advertising a starting pay for 75,000 new workers of $17 (up from $15) and tacking on sign-on bonuses of up to $1,000. New hires with proof of a Covid-19 vaccination will also receive an additional $100 bonus.

Furthermore, Amazon is only one of many reasons restaurants are struggling to find workers. Insider’s Ayelet Sheffey reported that many workers may make more on unemployment benefits than in their prior work. They also may be deterred by the continued concerns over COVID-19 and the need to provide childcare at home. On Wednesday, Taylor reported McDonald’s was blaming the labor shortage on enhanced unemployment benefits, though she also noted chains could solve the problem by paying workers more.

Restaurants and bars currently employ 1.6 million – or about 15% – fewer people than before the pandemic, according to federal data. The labor shortage makes it increasingly unlikely that the industry will return to pre-pandemic levels anytime soon, researchers at Glassdoor said.

“The COVID-19 pandemic may leave a lasting imprint on the U.S. labor market, permanently changing the hiring landscape both for restaurants and for the other industries hiring the millions of former food service workers that have flocked to new roles during and after the pandemic,” Glassdoor researchers said.

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