.The Santa Cruz Restaurant Scene’s Labor Crisis

Over the course of one week this summer, I counted a staggering 61 local job openings posted on Craigslist under “Food/Beverage/Hospitality.” Line cooks, bartenders, sandwich makers, hostesses, servers, prep cooks, baristas, sushi chefs, dishwashers and cashiers were all needed across Santa Cruz County, from Scotts Valley to Watsonville.

The long list of available jobs confirmed what I had been hearing from people in the restaurant industry for more than a year. One sous chef and kitchen manager I know, for example, has been pulling doubles and working six days in a row—or more—for months, unable to find suitable line cooks to share the load while commuting from Brookdale. I admire her steely reserve, but I wonder how long anyone can work under those circumstances.

Earlier this summer, I ran into Andy Guy, the hiring manager at 515 Kitchen & Cocktails, at the downtown farmers market. Usually upbeat, he looked pained when I asked him how he was doing.

“Not good,” he said.

Over the previous two months, he had found himself in the position of needing to hire 10 people, with no candidates walking through the door. Exhausted and incredulous, he ended up calling people who had worked at 515 years before to see if they needed any extra cash.

Earlier this year, I wrote a column in defense of the Santa Cruz food scene and it stirred up a conversation about some of our restaurant scene’s shortcomings. Many readers said they were discouraged from going out to eat locally after experiencing chronically poor service. It was a criticism that I couldn’t argue with, and I began looking into what many see as a sharp decline in local restaurant service over the last couple of years.

The biggest reason, it turns out, is simple: Santa Cruz County’s restaurant industry is facing a serious labor shortage.

But how could a town with so many young people and college students be facing a labor shortage, especially in an industry where even the most ambitious creative types have traditionally had to start at the bottom and work their way up? Do aspiring chefs find the notoriously ruthless industry less attractive now that they can find better 9-to-5 work in catering kitchens at high-end grocery stores and tech campuses? Is it fallout from the rise of the Food Network, which has led foodies to flood culinary programs over the last decade?

Perhaps, but many local managers and restaurant owners say there’s a far more dire reason employers are having a hard time finding and keeping staff: high rents in Santa Cruz County make it difficult, if not impossible, for someone working in service to make ends meet.

“Now more than any time in the past, hiring has been more difficult, mostly due to the lack of people being able to afford to live here,” says Guy, who has worked in the local service industry for six years and managed three other bars where he hired and fired staff. He says he’s never had so much difficulty finding eligible employees.

Guy says that some of the employees who left Santa Cruz didn’t necessarily move anywhere with less expensive rents—two went to New York City, one went to Colorado, and two went to the San Francisco area—but they left under the assumption that they would be able to make more money at larger, more high-end establishments in metropolitan areas with the skills they’d earned.

“Santa Cruz isn’t a big city, and the opportunities to make the amount of money with the time and money that you’re putting in is better elsewhere,” he says.

Even after filling positions, hiring so many people at one time puts considerable stress on the business and existing staff. “If you’ve been working at a place for four years and everyone around you is new, you have the same job title, but you have to work twice as hard,” Guy says. “People aren’t trained up, everyone’s learning, so it puts a considerable amount of stress on the people that decided to stay. That makes it even harder for the people who have stayed to stay longer, because their jobs are getting harder and harder.”

As a result, Guy admits that he’s occasionally kept workers he’d like to let go on for longer than he’d like, just to have enough people on hand. And if he does let someone go, it’s easy for that person to find work at another establishment. “I’ve had to let some people go for very justifiable reasons, but people don’t call for references anymore. Managers hire and say, “Oh thank God—a body! And then I’ll walk into a business and see that that person is there. People are just scrambling to find people.”

Guy believes that the only way the industry will stabilize locally is if housing costs become more manageable—either from an increase in the amount of affordable housing, or a decrease in rents. “The whole town runs on students and tourism,” says Guy. “It’s hard to have a community when no one in the service industry can make ends meet and you’re stacking 25-year-olds two to a bedroom in houses that are falling apart.”

NARROW MARGINS

Accommodation and Food Service is the fourth largest industry in Santa Cruz, employing 3,920 people at 297 establishments, according to the City of Santa Cruz Economic Development Office. Economic Development Manager J. Guevara points out that the high cost of living here is not just housing costs per se, but a combination of expensive housing, food, transportation and health care.

The median household income in the city of Santa Cruz is $70,297, and the median household expenditures on shelter, transportation, food and beverages, healthcare and utilities is $66,349. “This leaves only $3,948 per year in the median household income left to address any debt, savings, or pursuing further education or opening a business—that’s just over 5 percent of annual earnings left over,” says Guevara.

Many employees in the service sector, then, exist within a very precarious financial situation—an increase to any portion of the cost of living can overwhelm an already extremely thin margin.

The lion’s share of costs may be devoted to housing, but transportation can also be a significant factor, as many people who make up the service sector workforce may need to live farther away, and then pay more to fuel their commute.

Despite working at two high-volume restaurants in Santa Cruz, Alex Sainez realized it was simply too expensive to live in the area as a cook, and decided to live out of his car. That was two years ago.

“I ended up spending most of my wages on basic needs, and my bills for my truck,” says Sainez, “and I quickly realized that I was putting in all my time at work, and barely spent time in my room because of it. It made renting a room kinda pointless. I would stress all pay period about my bills and still struggle at the end of the month to get groceries. It wasn’t fun.”

He’s confident that he’ll find housing again—just not in the Bay Area. Temporarily, he believes the sacrifice is worth the culinary education he’s receiving in Santa Cruz. “It’s one of the best areas to learn to cook in the nation because of all the produce that can be found and utilized by various chefs that have raised restaurants here. I stay here and struggle like this simply to learn and improve my resume in hopes that I’ll find better employment with more survivable wages in an area that has a more affordable housing situation,” he says. “Passion over pain.”

BOTTOM LINES

As a result of legislation in the state of California that went into effect on Jan. 1 of this year, the minimum wage, which most restaurant workers earn, will increase every year until the end of 2022—from the current $10 per hour to $15 per hour. While supporters of the increase argue that it will create a more livable wage for millions of workers and increase their ability to buy goods and services, critics say the financial strain on some business owners will be too severe.

The wage increase, and his ability as a business owner to provide a living wage for his employees, has been at the forefront of Alec Stefansky’s mind since he opened Oasis, Uncommon Brewers’s tasting room and Matambre restaurant, with business partner Chris LaVeque earlier this year.

“It’s one of the things I’m looking at,” says Stefansky. “Just being able to offer regular raises and cost-of-living adjustments, given how quickly rents are rising, is going to be really difficult to do. I can see a future in a couple years where people who are working normal jobs are going to be priced out.”

With the knowledge of the competitive service industry market and in anticipation of the increase, he says Oasis is offering wages above the minimum in the kitchen in order to try and maintain the existing staff and keep them motivated.

“Kitchen work is hard work with long hours. It’s meticulous and hard to do. It’s one of those jobs where there’s a lot of demand in the county, so if it doesn’t work out one place, people can hop around fairly often. It’s one of our concerns right now that they keep the core group.”

While the wage increase may strain his business down the line, Stefansky says the alternative is not an option, at least not in Santa Cruz. “How do you expect to pay rent on minimum wage? It’s not going to happen.”

He points out that rising living costs, accelerated by rapidly increasing rents, are going to lead to a larger problem in this community—less expendable income means that fewer people will dine out.

“If people are spending all their money on housing, then they’re not spending their money going out to a nice dinner and then having a beer,” he says.

Despite his best intentions to provide a sustainable work environment for his employees, Stefansky feels there’s little he as a small business owner can do to fix larger political issues. “The pathway to the middle class is getting narrower in this country, and that’s something as a small business owner that I don’t have the power to change. Hopefully we’ll be able to vote for someone who can do something about it.”

BREAKING POINTS

Nikki Howe, co-owner of Cafe Cruz, believes that there may be other factors in addition to rising rents contributing to the shrinking service labor market. She points out that the construction industry is booming again, and the sectors draw from the same hiring pool. At the same time, increasing political pressures on immigrants may be contributing to fewer being able to secure work permits. She says that several potential hires have fallen through when the restaurant has asked for work authorization.

“Maybe it has something to do with rent increases, but looking down the line, it’s hard to know because I think all these factors contribute,” says Howe.

Because Cafe Cruz offers benefits, health insurance, vacation and sick days and 401Ks to all full-time employees working more than 30 hours, Howe says that while finding labor is a concern, they have not felt it as acutely as other local restaurants. She says they are currently hiring for one line cook position, but otherwise are fully staffed.

However, Howe explains that when employees have left the community, housing concerns generally play a part: “Maybe it’s not rent increases, but they’re looking down the line, and realizing they could have more in a more affordable community.”

With housing in Santa Cruz at a premium, it’s unlikely rents will decrease anytime soon. According to Zillow, the leading online real estate and rental marketplace, the average rent in Santa Cruz Metro area for July 2017 was $2,978, about $2.30 per square foot, an increase of 0.6 percent from June 2017 and an increase of 2.8 percent from last year. Watsonville is experiencing the most rapidly increasing property value, at 0.9 percent per month.

Perhaps Cafe Cruz’s model is the solution restaurants will have to face, offering restaurant workers more attractive benefits in order to see the industry return to the competitive job market.

This may seem dramatic for an industry that traditionally pays minimum wage by the hour and often doesn’t provide paid leave or healthcare, but as the lack of skilled service workers becomes more severe, financial losses resulting from low and unskilled staff may outweigh the costs.

BIG SHIFTS

Sue Slater, chair of Cabrillo’s Culinary Arts and Hospitality Management Program, says she receives calls and emails about five times a week from restaurants desperate for employees. “They’ll call and say, ‘Please, I just had two line cooks leave.’ Or they have no one to work for Mother’s Day. Everyone’s desperate for bodies.”

Unfortunately, she’s often unable to help them. “We’ve seen a tremendous drop in students. Each semester, the numbers chip away,” she says. “For instance, we were turning away students from the program two years ago. Now we’re struggling to keep labs open. It’s a big topic of conversation—why is this happening?”

She admits that they typically see lower enrollment when the economy is good, as it is now, because people are more likely to return to school to pursue new careers when jobs are scarce. But she also sees many workers driven into other more profitable industries. Those that remain, especially line cooks, are in high demand.

“Employers are basically hiring people off the street,” says Slater. They then incur the timely and expensive task of training those employees from scratch, keenly aware that customers may not return to their establishment if they have a poor service experience in the interim.

Clearly, this labor shortage is not unique to Santa Cruz County. Cooks are fleeing expensive cities like San Francisco in favor of more affordable locales. In an attempt to address this, California is implementing the Strong Workforce Program, which will create more job skills training courses at community colleges in the state. As part of this program, Cabrillo will offer two non-credit entry level classes in knife skills, and sanitation and cooking techniques for restaurant workers.

Slater hopes that these one-day classes will be a short-term band-aid for problems that face the workforce, but doesn’t expect them to be available before fall of 2018. “We’re here to serve the community, and we see that this is something the community needs right now. Employers are already trying to pre-book, and some have said they’ll offer raises to employees who take them.”

But in order to keep skilled workers, especially cooks, she believes employers will need to consider how they can make these jobs more attractive. One example of how this might be done was implemented by Danny Meyer, CEO of the Union Square Hospitality Group, at his high-end restaurants in New York City including Gramercy Tavern and The Modern. In an attempt to compensate his whole team fairly, in 2015 Meyer eliminated tips in lieu of a service charge included in the price of the meal, a program he calls “hospitality included.” The price on the menu is the price the customers pay and profits are equitably distributed among all staff. Skeptics decried the controversial experiment, but eighteen months later Meyer reported in an interview with NPR that his staff were very happy with the change, and to his knowledge he hadn’t lost any customers to sticker shock—in fact, he said, the practice was very well-received. Slater believes this may be the path forward for restaurants. “While it’s scary and risky,” she says, “the industry has to change.”

Update 08/31/17 3:55PM: Misspelling of Alec Stefansky’s name and Uncommon Brewers corrected.