Food Services: More Than Grub and Growlers

Food Services: More Than Grub and Growlers

by Erik Knoder

January 24, 2017

Food services and drinking places was Oregon’s biggest private-sector industry by employment in the second quarter of 2016, with 151,147 employees.

The industry is also Oregon’s third-lowest paying after employment in private households and the amusement, gambling, and recreation industry – with a monthly average wage of around $1,500. 

Foods services and drinking places provide employment to many Oregonians, and the industry also provides many people (this author included) their first work experience. These jobs offer flexible schedules and teach a work ethic, teamwork, responsibility and customer service. They also get criticized as being dead-end “McJobs.” This article will examine this sometimes-controversial industry and the quality of its jobs.

Food Services Employ Many

The food services and drinking places industry is the largest part of the leisure and hospitality sector. The leisure and hospitality sector itself has a little more employment than all the manufacturing in Oregon. The food services and drinking places industry is made of three groups; it includes restaurants, both full-service and fast food as well as nonalcoholic bars; specialty food services, such as caterers, contractors and food carts; and bars serving alcoholic beverages.

The restaurant group is by far the largest part of the industry, with nearly 136,000 (90%) of the employees in the second quarter of 2016 (the most recent data available). Drinking places had about 8,000 employees and businesses in the specialty food services group had about 7,000 employees.

Within just the restaurant group of businesses, full-service restaurants were the most numerous (nearly 4,100 in Oregon) and had the most employees (about 70,000). There were about 3,100 limited-service, or fast-food, restaurants with about 50,000 employees in the second quarter of 2016. Oregon had about 1,200 snack and nonalcoholic beverage bars with around 13,000 employees and fewer than 100 cafeterias with about 1,100 employees.

Government restaurants? Yes, local governments in Oregon operate about a dozen enterprises, mostly cafeterias, with around 100 employees in the food services and drinking places industry. Their average wage was about $2,000 per month in the second quarter of 2016.

Restaurant chains are some of the larger employers in this industry. Some food service contractors are also large firms because they either serve large venues, such as sporting arenas, or because they have numerous institutional clients. On average though, these were small enterprises with about 15 employees each. This may be one reason for the low wages in the industry; small firms typically can’t achieve economies of scale that allow them to offer higher wages.

As might be expected, the number of food service and drinking places varies in different parts of Oregon. Morrow County (population 11,630) in eastern Oregon had the smallest share (1.3%) of any county of its payroll employment in the industry in 2015. At the other extreme were Clatsop and Lincoln counties (on Oregon’s tourist-laden coast) with 18 percent and 16 percent, respectively, of their total payroll employment in the industry. The top county in Oregon for food services in 2015 was Sherman County with 20 percent of its employment in the industry – but that was only 105 jobs. For the state as a whole, food services and drinking places comprise about 10 percent of employment. In absolute size, Multnomah County, of course, had the largest food services and drinking places industry with about 42,000 employees in 2015.

Oregon’s employment in food services and drinking places grew by 9.4 percent over the past couple years – from June 2014 to June 2016, and added 13,000 jobs. By comparison employment in all industries combined grew by 6.8 percent during that time.

Young Workers and High Turnover

Workers in the food services and drinking places industry tend to be women (53% versus 47% men) and are younger than in other industries. In 2015, 31 percent of the workers were ages 14 to 24, 27 percent were ages 25 to 34 and 42 percent were age 35 and over. This age distribution has shifted somewhat toward older workers in the past few years. The age distribution for workers in all industries combined in Oregon shows less than half this proportion of young workers and 50 percent more in the older age group. The preponderance of young, probably less experienced, workers in food services and drinking places may be another contributing factor in the low wages paid. Less experienced workers may be less productive or require more expensive training.

Food service workers are also in transition more. The turnover in the industry was 15.2 percent for 2014 versus 9.0 percent for all industries in Oregon combined.

Payroll records show that 26 percent of the people who had jobs in food services and drinking places in the second quarter of 2014 had their primary job in a different industry by the second quarter of 2016. Another 27 percent had no records of working in Oregon after two years. They may have quit working, moved out of state or become self-employed. In total, more than half the workers in the industry had moved on to some degree after two years. This high turnover may also affect wages; many firms have policies of tying pay raises to tenure.

Occupations in Food Service

More than 80 occupations are found in the food services and drinking places industry, from CEOs to parking lot attendants, but the most common ones are those that prepare and deliver food and drinks.

About one-fourth of the workers in the industry are doing food preparation or combined food preparation and serving work. Add this group to the 9 percent working in the closely related occupations of fast food cooks and counter attendants and we can see that about 36 percent of employees are preparing and serving food, often in limited-service food establishments such as fast-food restaurants, delis, and cafeterias.

Although it can be hard, hurried work, these occupations generally don’t pay very well. Most of the more common occupations had a median wage under $10 per hour in 2016. Cooks and managers made a little more, but the common occupations in the industry are correctly noted for their low pay.

In the second quarter of 2016 Oregon’s minimum wage was $9.25 per hour. That quarter about 11 percent of the jobs in Oregon’s food services and drinking places industry paid an hourly wage within 10 cents of the minimum allowed. Fully 71 percent of the jobs paid less than $15 per hour.

Most of Oregon’s industries have wage distributions that are more uniform. All industries combined had about 60 percent of their jobs paying more than $15 per hour in the second quarter of 2016. Less than 1 percent of food services jobs pay high wages of $50 per hour or more. The information sector has more than 20 percent of its jobs paying these high wages.

Why does the food services and drinking places industry pay low wages, and why do workers accept low-paying jobs? The answer is probably the same as it is for industries that pay high wages. Firms pay the wage that the labor market sets and people accept those wages because they are the best they can command at the time.

The Industry’s Impact Beyond Grub and Growlers

The most common occupations in the food services and drinking places industry (listed in the table) have very modest skill requirements. The skills required to be a combined food preparation and serving worker include the ability to operate a cash register, use basic mathematics, follow recipes and clean dishes, among others. There are typically no educational requirements, although a high school diploma may give someone an advantage when applying for a job. A great number of Oregonians in the labor force either have these skills or could gain them with a little on-the-job training. This means there is a relatively large supply of labor for this occupation. Because wages (and prices) in a market economy are determined by supply and demand, this large supply works to decrease the wage in the labor market for combined food preparation and serving workers.

The secret to having a high-wage job is to find a job that very few people can do because of the requirements for skills, training, education, natural talent, licenses, union membership, or even personal contacts. Because most jobs in food services and drinking places have few requirements, the labor supply remains large and workers are paid less than for jobs with many requirements.

But low-wage jobs are not the blight on society that they are sometimes portrayed to be. People generally take low-wage jobs because they are a better option than the alternative – which is usually no job at all. Mark McMullen at the Oregon Office of Economic Analysis has noted that having someone take a relatively low-wage job, compared with not working, still raises the total and per capita income in an area.

Food services and drinking places are major employers in Oregon. Although the industry often pays low wages, these jobs offer a paycheck for workers and the opportunity to gain skills needed for other jobs. Eating and drinking businesses also can function as a community amenity that helps attract new people.