Saturday, April 6, 2013

Bars and Restaurants 3rd Largest Job Creators

While it was the 18th Amendment that established Prohibition, it was the Volstead Act that was passed on October 28, 1919 that clarified the law to mean "beer, wine, or other intoxicating malt or vinous liquors". Almost 10 years later to the day, the stock market crashed on October 29, 1929.

After the beginning of the Great Depression people started changing their opinion on Prohibition. People needed jobs. The government needed money. Making alcohol legal again would open up many new jobs for citizens and additional sales taxes for the government. On December 5, 1933, the 21st Amendment to the U.S. Constitution was ratified and repealed the 18th Amendment, making alcohol again legal.

And now in 2013, in the aftermath of the Great Recession, it's still no different. People still need jobs and the government still needs money. And our bars and restaurants have helped, because even with millions of Americans still unemployed (about 30 million when counting "discourage workers"), people who haven't been laid off and still have discretionary income are frequenting the bars and restaurants more than ever, at least, according to jobs gained.

One could surmise that thirsty and hungry patrons are the REAL job creators, and that beer and cheeseburgers spurs our job growth (albeit, usually part-time and low-paying jobs).

Restaurant job growth hit a 17-year high in 2012 and was an engine of growth for the nation’s employment recovery in 2012 --- and that trend is expected to continue throughout 2013.

Eating and drinking places – the primary component of the restaurant industry which accounts for roughly three-fourths of the total restaurant and food service workforce – added jobs at a strong 3.4 percent rate in 2012 (according to figures from the U.S. Bureau of Labor Statistics) and represented the strongest increase since a 3.9 percent gain in 1995.

This marked the continuation of a long-term trend, with 2012 representing the 13th consecutive year in which restaurant job growth outpaced the overall economy. In fact, during the last 13 years, the number of eating-and-drinking-place jobs jumped 25 percent, while total U.S. employment rose by only 4 percent.

Overall, the restaurant industry has been one of the top job creators since the end of the recession. In the three years since the beginning of the jobs recovery in March 2010, eating and drinking places added a net 856,000 jobs, ranking only behind the professional-and-business services (nearly 1.8 million jobs) and health care and social assistance (949,000 jobs) sectors. (One might consider investing in healthcare stocks because of our aging population.)

Restaurant employment currently stands at 441,000 jobs above its high-point before the recession, while the overall economy is still down 3.2 million jobs from the pre-recession peak. (Note: We've also had about 6 million high school and college graduates since then --- meaning, we would still need 9.2 million more jobs to break EVEN with pre-recession levels to account for population growth)

The New York Times reports the average (mean not median*) hourly gross wage in food services and drinking establishments is $11.98 an hour, which is about half that for the private sector over all ($23.82 an hour).

* The "mean" wage (average) is the amount obtained by dividing the total income of the labor force by the number of earners in that group --- whereas, the "median" wage is from dividing the income distribution into two equal groups, half having income above that amount, and the other half having income below that amount. According to the Social Security Administration, the "average" annual income for wage earners is $41,211 a year, but the "median" annual income for wage earners $26,965 a year.

A great many of employees in the food and beverage industry (e.g. bartenders, cocktail servers, food servers, room service waiters, bus persons, etc.) are "tipped employees" --- and unless they belong to a hotel or other union --- earn much less per hour where the state law sets their own minimum wage rate for this class of workers. 14 states currently sets this at only $2.13 an hour. (see the list at the Department of Labor). The newly proposed minimum wage bill, besides raising the minimum wage from $7.25 to $10.10 and indexing it for inflation, would also raise the hourly wages for tipped employees as well.

It's also worth noting that many times these tipped employees are under threat of an IRS audit to comply with an ironically named "Voluntary Compliance Agreement", when employers deduct taxes on the calculated tips they earn from their hourly wages --- and many times receive ZERO in their paychecks*.

* To the best of my knowledge, nobody ever gets a "negative paycheck", but they may owe taxes at the end of the year according to their annual adjusted gross income --- such as if they have other earnings from other sources.

By contrast, heirs to family fortunes (e.g. Kim Kardashian, Paris Hilton, etc.) can get their first $10 million exempted from any federal income tax.

* As of last year: States with a $2.13 an hour minimum wage set for tipped employees were Indiana, Kansas, Kentucky, Nebraska, New Jersey, New Mexico, New York, South Dakota, Tennessee, Texas, Utah, Virginia, Wyoming and North Carolina.

Related Post: Hotel Maids: Work the Hardest, Paid the Least

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