From Hospitals to Restaurants, Philly Employers Can’t Find Enough Workers

The so-called “labor shortage,” which has employers offering signing bonuses and $15-an-hour wages for the first time ever, may actually be what the city needs to build a healthier economy.

labor shortage

The reasons behind the labor shortage — and the debate over whether there’s a shortage at all — could shape the city’s economy for years to come. Illustration by Brooks Robinson

Stephen Starr is so desperate for workers, he’s considering turning to child labor. That, anyway, is the premise of a series of recent tongue-in-cheek videos posted to Starr’s Instagram in which the restaurateur interviews adorable kindergarten-age job applicants. Sample question: “What kind of food can you make?” Response, from a grinning pigtailed girl: “My specialty is boiled egg!”

Next question: “How much money would you like to make a week?”

“Ten dollars!”

“I think that’s reasonable,” Starr says.

The point of this routine is recruitment — “Tag someone who would make a good addition to the Starr family,” the videos are captioned — and while one might quibble with the strategy of discussing $10-a-week wages when many in the ­restaurant-industry workforce are hesitant to come back precisely because of low wages, what’s most notable about the skits is their existence in the first place: Even someone with Starr’s résumé-boosting potential is being forced to concoct unusual recipes to attract employees in response to what’s been dubbed a nationwide “worker shortage,” as employers struggle to hire back many of the 22 million people laid off at the start of the pandemic. Of course, if winning over hearts and minds through comedy comes up short, there are always more blunt instruments. Starr Restaurants has also been canvassing Philly neighborhoods and passing out job-info fliers, which are good for a free glass of wine, and the promise of a $300 signing bonus upon hiring.

While the service sector has gotten the lion’s share of attention — according to the Bureau of Labor Statistics, accommodations and food services is one of a few sectors nationally in which job openings exceed the number of unemployed — the challenge of finding employees extends beyond kitchens and hotel ballrooms. The Philadelphia school district saw such high demand for its summer-school program that it couldn’t hire enough teachers for in-person instruction and had to move some classes online. Einstein Healthcare’s Philly locations have 850 job openings, including 146 for nurses — more than double the usual number. According to the sanitation workers’ union, the Streets Department has imposed mandatory overtime and six- and occasionally seven-day workweeks for the past 18 months and can hardly retain trash workers.

As the requisite (and predictable) political battle breaks out — Republicans blaming generous unemployment programs and condemning potential wage growth as fuel for inflation; Democrats blaming stingy businesses not willing to pay the market rate for wages — it can be difficult to interpret the mixed signals coming from some economic indicators. Nationally, there are still 5.7 million fewer jobs than in February of 2020. The number of people participating in the labor force — those with jobs or looking for one — is down five percent in Philadelphia. And this is a city that even before the pandemic had one of the lowest working-age labor-force participation rates among large U.S. cities, at just 71 percent. Unemployment was at 5.4 percent nationally in July, while the most recent tally for Philadelphia, taken a month earlier, was 9.4 percent — this despite businesses all but begging workers to come back.

Yet at the same time, significant numbers of people are still being hired. July saw 943,000 jobs added to the U.S. economy — the largest gain since August of last year. Of those jobs, 253,000 were in restaurants and bars — supposedly the sector for which it’s nigh impossible to hire. People are coming back to work; it’s just not an all-at-once stampede.

No one is sure how long this labor market will last. Thanks to more robust government aid, along with the more or less unprecedented quirk of employers across the country all trying to hire at the same time, it’s clear the current circumstances favor workers over employers. But with weekly unemployment work-search requirements restored in Pennsylvania and the expiration of the $300-a-week expanded pandemic unemployment benefits in September, it’s possible to see this more as a short-term malfunction in the system than a fundamental realignment.

Not that that changes the view of workers and labor advocates who feel there are real gains out there for the taking. “Now is an opportunity for workers to push back and lock in permanent increases that they can hang onto for years to come after this,” says Emiliano Rodriguez, an organizer with Unite Here Local 274, which represents hotel and food service workers in Philly. Better pay, more paid time off, health-care and child-care benefits — it all seems possible, even in some of the lowest-wage industries. For the poorest big city in the country — one where eight in 10 of the fastest-growing jobs for Philadelphia residents before the pandemic paid less than $40,000 a year and where the median household income is just $46,000 — a recalibration of the labor market might not be an opportunity, but an imperative.

Etinosa Emokpae worked her entire career in restaurants. By March of 2020, she’d ascended to one of the cushier jobs in the industry, as a sommelier at Rittenhouse’s critically acclaimed Friday Saturday Sunday. To get there, she’d pushed through a carousel of jobs, from serving to managing; as a manager, she often worked long hours, sometimes 80 a week, and at worse pay than as a server, since she traded tips for a salary. Her life began to feel, she says, as though “all I do is go to sleep, wake up, go to work, go back home to go to sleep. Repeat and do it again.” When she was laid off in March, she made more on unemployment than she had in almost all the restaurant jobs she’d held over the previous decade. Instead of going back, she’s now training to be a sales rep for a wine distributor.

Charles Hutchinson was hired as a city trash worker in November 2019. Seven a.m. starts, home at three p.m.; in between, 18 tons of trash lifted. Salary: $34,000, plus overtime. It was hard enough even before the pandemic. Then, Hutchinson says, “People were home; the trash got heavier.” Injuries increased, and the city threatened discipline for those who didn’t show up to mandatory Saturday shifts. (A Streets Department spokesperson says consecutive mandatory Saturdays have only been in place since May of this year, and that they’re allowed under the city’s bargaining agreement.) According to a report by WHYY, more than 250 trash workers have left the Streets Department in the past year. Hutchinson was one of them.

A similar story has been playing out at hospitals. After the recurring nightmare year and a half of the pandemic, many older nurses on the cusp of retirement decided they’d had enough. Meanwhile, newly christened nurses entered the workforce in a period of crisis. Some of them aren’t even making it through the first week of orientation before they quit. “Part of it is because we’re so short-staffed and they see how much we’re running around,” says Angela Neopolitano, a nurse at Delaware County Memorial Hospital for 40 years. “The other part is like a ‘This isn’t what we signed up for’ kind of thing.” Of the 27 registered nurses at the hospital, eight retired in 2020, and seven more have left so far this year. “The last six months have been really, really­ bad, the worst I can remember,” Neopolitano says.

To overcome these dynamics, employers across the economy are dangling carrots of varying degrees of desirability. Neopolitano’s hospital is handing out a $10,000 recruitment bonus to nurses who end up recommending future hires. Einstein Medical Center Philadelphia is offering $20,000 signing bonuses to experienced nurses — emphasis on offering, because it can’t actually find people to take the jobs. Even fast-food chains Chipotle and McDonald’s have announced plans to raise wages to $15 an hour (although in both cases, it’s actually average wages, which means not everyone will be making $15 an hour. And for McDonald’s, the supposed raise won’t affect any of its franchises, which is to say 95 percent of all McDonald’s locations).

“The last six months have been really, really bad, the worst I can remember,” says Angela Neopolitano, a nurse at Delaware County Memorial Hospital.

For Irfan Mandani, an entrepreneur who owns eight concessions franchises at the Philadelphia airport, including Dunkin’ Donuts and Smashburger locations, it’s difficult to understand why he isn’t more successful hiring workers. He says only 65 percent of the staff that were furloughed or laid off came back and that he’s only managed to bring on 15 additional employees. On paper, he would seem to be a pretty good person to work for: He offered hazard pay during the pandemic and monthly attendance bonuses of $100; he already paid workers more than the city-mandated airport minimum wage of $14 an hour; and he’s kept up plexiglass barriers as a COVID safety precaution. Plus, his workforce is unionized with Unite Here and has health-care benefits.

It doesn’t seem to matter. “I was hoping we would start hearing from employees come August,” Mandani says. “But we haven’t.” Potential reasons abound: Maybe employers outside the airport are now paying more competitive wages; maybe people are wary of working in a travel hub amid rising Delta variant cases; maybe they’ve changed professions entirely. “There are so many moving parts, and those factors are beyond our control,” Mandani says. While at least one factor is in his control — paying even higher ­wages — he doesn’t think that’s sustainable. Anyway, he says that’s not the root of the problem: “It’s a bigger issue than just paying a higher wage.”

If the situation is difficult in lower-wage jobs, it’s even worse in ones like nursing, where shortages existed before the pandemic and fledgling workers have to be trained for years. “There’s an aging population, people are living longer, the age of the workforce is growing, and baby boomers are thinking about retirement. And there’s also a very limited supply of new graduates, because there aren’t enough professors to teach in the nursing schools,” says Gina Marone, chief nurse executive of Einstein Healthcare. Meanwhile, nursing schools say one of the main reasons they can’t pump out enough graduates is that hospitals are too overworked to accommodate students looking to acquire essential on-the-ground education. Of course, the lack of students is part of the reason hospital staffs are so overworked in the first place.

There may not be any great precedent for our current pandemic economy, but Walter Licht, a labor historian at Penn, sees a kind of analog in postwar economics. “When you look historically at wars, particularly in the 20th and 21st centuries, there are always periods of economic dislocation,” he says. Economies had to recalibrate from wartime to consumer production, absorbing returning soldiers and shifting them to new jobs along the way.

A similar force may be at play now. Charles Hutchinson left his job as a trashman and now drives for Uber, setting his own hours and making more while working less. Businesses in fast-growing sectors of the economy have new appeal: Why work for the tipped minimum wage of $2.83 an hour or pick up trash at a sub-$40,000 salary when you can earn a guaranteed $15 an hour plus benefits at a warehouse job? Despite frequent media coverage of poor working conditions at its warehouses, Amazon brought on 500,000 new workers worldwide last year. A recent Pew report found that two-thirds of unemployed Americans have seriously considered changing professions altogether. That’s something Etinosa Emokpae understands: “I think ultimately, this is about people not wanting to go back to shitty jobs.”

For all the talk about a worker shortage, consider another possibility: Maybe there isn’t much of one at all. “A shortage means that at the market price, you can’t buy what you need,” explains Wharton management professor Peter Cappelli. Businesses may need labor, but if they’re not paying the true market price reflecting that demand — that is, high enough wages — there isn’t really a shortage. In Cappelli’s telling, businesses might be hesitant to pay more right now because they know that unlike a short-term spike in price for commodities like gasoline or lumber, wages are hard to bring down once they’ve risen. If businesses did pay more, Cappelli suggests, they’d have no trouble hiring.

There’s some evidence that he’s correct. The month of July saw more than 380,000 jobs created nationwide in leisure and hospitality, accounting for more than a third of all gains. According to an analysis by the Economic Policy Institute, wages in that sector also rose. To Cappelli, this is precisely what a functioning market looks like: “The idea that there’s something weirdly wrong structurally is certainly not right,” he says.

Of course, that isn’t stopping some policymakers from harping on an obvious bogeyman: unemployment benefits. By July, Republican governors in 25 states ended the $300-per-week expanded pandemic benefits, arguing that people had given up their search for work and were opting to live off government largesse.

Nobody is denying that unemployment and other pandemic aid is influencing the economy. Despite job losses of historic proportions, monthly savings as a percentage of income averaged 19 percent from April 2020 to April 2021, compared to eight percent over the same period a year prior. Similarly, in a survey from the job-search website Indeed asking people why they weren’t returning to work, 20 percent gave financial stability as a reason.

But the question is whether continued unemployment is the top factor or even a primary factor keeping people away from work — and there’s considerable evidence it’s not. In that same Indeed survey, unemployed workers cited spousal employment, family-care responsibilities, and concerns over the Delta variant as three major reasons they weren’t urgently looking for a job. Though the economy added 266,000 jobs in April, the number of women in the labor force actually dropped by 64,000, according to a Washington Post analysis — another potential indication of lingering child-care challenges. And then there’s this: Per June BLS data, the states that cut unemployment had the same rate of hiring as those that kept the extra benefits.

If there’s any sector where you might expect unemployment to act as a barrier to job reentry, it would be leisure and hospitality, where in 2019, the average employee worked 25 hours a week for $14.50 an hour, for a total of $18,600 a year. And yet from March to July of this year, that sector accounted for half of all new U.S. jobs. Here in Philadelphia, there were just 1,800 workers from the food and accommodations sector on unemployment in June, down from a peak of 25,000 a year before and just 200 above pre-pandemic levels. Maybe those people stopped looking for work completely, or maybe they took jobs outside the service sector. But one thing is clear: They’re not hanging around on unemployment.

Shortage, quasi-shortage or no shortage at all, the labor market is changing the way firms operate. Einstein Medical Center currently employs 50 über-expensive travel nurses to make up for lack of staff. Stephen Starr’s Continental Midtown in Center City can’t open for brunch or lunch. Chris’ Jazz Cafe decided to open at limited capacity, down from 115 seats to 60, and ditched its regular menu in favor of a mandatory $75 prix-fixe menu to guarantee a certain amount of revenue per table. “We’re actually doing about 70 percent of revenues before COVID with limited hours,” says owner Mark DeNinno. “It blew me away.”

In another sign of the times, service-sector employers have cleverly reconsidered the way they present themselves to would-be employees. If the lack of a sustained social safety net once assured restaurateurs of an abundant supply of cheap labor, employers are now forced to compete, like the Googles and Facebooks of the world, specifically on worker benefits.­ Take, for instance, the very public pronouncement from the HipCityVeg restaurant chain that it would be implementing a buzzy “$15 for our families” policy: a $15-an-hour minimum wage, plus paid time off for all employees. (That businesses are now bragging about something as basic as paid vacation tells you something about what conditions used to be like.)

Then there’s Jen Zavala, a Philly ­restaurant-industry veteran who’s in the process of opening a tamale and taco restaurant on East Passyunk and is trying to cast herself as a different kind of operator. Zavala plans to offer health insurance and a full month of paid time off: two weeks in January plus two more in August. And she imagines ditching the hackneyed “The customer is always right” motto to prioritize staff well-being. “We’re offering you a service,” she says. “We’re not servants.” She thinks all of this will give her an advantage when it comes to staffing up.

A pandemic has a way of reshaping things. That’s what makes this an important moment for someone like Center City District president Paul Levy, who spends his waking hours contemplating ideas he thinks will make the city better. He knows this much about the local economy: “The status quo pre-pandemic sucked,” he says, before launching into his usual refrain that Philadelphia has been a slow-growth, low-business-density, high-poverty city. To him, one lesson of the pandemic is that Philly’s reliance on wage and business taxes is imprudent in a world where some amount of work-from-home is probably here to stay. He’s started proposing that the city spend one percent of its $5 billion budget on wage and business-income tax reductions, which he claims would spur new business, create better-paying jobs, and generate consistent real estate tax revenue from new office space.

There are other ways to envision positive changes, even absent tax-policy corrections that would take years to implement. Maybe some service-sector jobs really do become less exploitative and higher-paying. Maybe hospitals take the nursing shortage as a chance to offer career development for their existing ­lower-wage employees, creating a pipeline of new nurses and nursing students — helping both meds and eds.

“The war for talent will be won by places that create good jobs for every level of educational attainment, from GED to PhD,” says Matt Bergheiser, Paul Levy’s counterpart at the University City District. That wasn’t the Philadelphia of the past, and it would be naive to suggest that current conditions in the labor market alone will make it the Philadelphia of the future. But incremental progress, however it comes, is nothing to scoff at. “People are seeking frontline jobs that they want, rather than jobs that they need,” Bergheiser says. “At some level, we should celebrate that.”

A version of this story was published as “Labor Pains” in the October 2021 issue of Philadelphia magazine.

Philadelphia magazine is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and economic mobility in the city. Read all our reporting here.