Comment by adamsiem | Hacker News Reader

Comment by adamsiem | Hacker News Reader

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Beer Garden Anecdotes (Few Hiring Candidates, Increased Competition for Wages due to PPP2)

- We have seen approximately 1/10th the amount of applicants as compared to our hiring prior to Covid.

- We have reached out to 50+ people via the hiring platforms i.e. Indeed recommended candidates, with a very limited response rate.

- Of the 6 people who a) applied for our job AND b) responded to our requests for interviews, only one has shown up for their scheduled interview. He was immediately hired.

- The single hire we made, for $14/hr as a dishwasher, did not return on day 4 as he was offered a position at a larger restaurant for $18/hr. That is not a sustainable market rate we can offer. I assume they are increasing their hourly rate due to 1) lack of talent seeking jobs or 2) large influx of cash from PPP2.

- I had three scheduled interviews, and all three were no shows, sending messages of cancellation either 10 minutes before, or not at all.

- I reached out to all three of those after their missed interview times, and two have rescheduled their interviews for. Typically, we would not entertain a no-show like that, as dependability is critical on a small team, but we are not in a position to be picky. (I'm curious if it is possible to use these scheduled interviews in fraudulent claims of seeking but not finding work. We literally hired the one person who came in.)

- We have had job postings on Indeed.com, Craigslist.org, and Facebook for the past 3 weeks - as well as leveraging our website and social media posts.

- Our current team of 6 other people are all hires from before Covid.

In other words: the rent is too high. If it was lower you could actually pay wages at a level that people would show up for. A correction of real estate prices is long overdue, there is no need for landowners to skim off money that could be used more productively in others sectors of the economy.

I don't think the prices are gonna correct as much as people think it would, considering my entire generation is waiting on the sidelines to buy, the demand will always be there until it's satisfied.

12% of US detached housing is vacant. Property is being held by speculators who are betting that interest rates will fall and increase the value of property. No amount of supply will meet the demand of an asset class that increases in value by 6% a month.

Interest rates are at historic lows. The Fed rate going negative has been discussed in months gone by. Lender money to borrow is a little tougher as with rates so low they may keep it in equities, or buy GME or Bitcoin where they have higher upside potential.

Buying GME to offset losses in real estate is the most 2021 thing I've heard. I don't know if I should laugh or cry.

The only thing I have to say is that I would expect the government to push more federally backed mortgage loans at their preferred interest rates if they sense a slowdown in private lending. Heaven forbid markets correct themselves.

Ah, Sorry, I come from the perspective of Canadians, you should see how insane the Canadian Market is right now.

Do you have a source for this? Trying to dig through census data but can't find this specific metric.

Total Housing Estimate - https://fred.stlouisfed.org/series/ETOTALUSQ176N

Vacant Housing Estimate - https://fred.stlouisfed.org/series/EVACANTUSQ176N

So, looks like closer to ~11% as of that data.

I think you may've missed some subtext from the parent post. It sounded to me like people are not showing up to interviews not just because of higher wages offered elsewhere. It sounded like, at least partly, those interviewees currently do not need to show up to job interviews in order to make ends meet. This has the added effect of lowering the labor supply, which to me explains the struggle parent poster is facing.

Everybody's gotta wet their beak every step of the way down. Landowner, restaurant owner, manager.

By the time it reaches ground level nothing left but crumbs

Is the solution to this inflation?

Inflation is the result of rising wages. However, we're in a place now where wages haven't even matched inflation for decades. Suddenly things start catching up and everyone loses their mind, claiming it's the fault of unemployment insurance.

Can you elaborate the types and causes of inflation being mentioned?

Asset inflation, I assume?

Inflation benefits people with debts. People with assets are quite untouched, you'd even think that real estate is viewed as a safe investment (the "concrete gold" meme). Better unemployment benefits would help, but under Delaware Biden they are a political impossibility.

Unemployment benefits are currently the best they’ve ever been by a wide margin.

The word is "currently", isn't it? They'll be rolled back soon enough, same as in 2008, to get the plebs back to work.

One assumes, though it's expected the child tax credit will be introduced in a permanent bill eventually, so I think there's a chance we'll see a more permanent UI benefit too. At least I hope.

Pfft. Biden rolled back immigration restrictions in a period of record unemployment, and you expect improvement in unemployment benefits? Labour must be squeezed, and the child tax credit does that, too. Can't have a reduction in births, that would mean less workers fighting for a job twenty years down the line.

That would require interest rates to rise - which would pop the current asset prices and lead us into a decadal global recession.

There is no way out. Get out of debt and hoard as much as you can. Bad times are coming.

Does it require changes in rates? Interest rates determine absolute property prices, by way of per month payment prices, but it’s the latter that should have primacy, right? What people can afford to pay each month.

Right. Property values are highly correlated with incomes, because that determines what purchasers or renters can afford. Interest rates determine how much of a loan a purchaser can service. So, low rates allow purchasers to bid up the price of assets, which effectively transfers money from borrowers to current asset owners.

Since property prices are highly correlated with incomes, and income changes are correlated with inflation and productivity gains, the only lever that can be pulled to change real estate prices is the interest rate.

For property to become more affordable, the interest rate has to rise. Since that would cause property values to drop, many people who recently purchased property would find themselves owing more to a mortgage lender than their property is now worth, and it would likely remain that way for a decade. Many of those people were stretching to afford their purchase before, with 3% down programs and half their monthly income or more going to service a loan. We are already at a record high level of mortgages in forbearance.

So, the interest rate cannot be allowed to rise. The only people that would benefit are people with a decent income, no debt, and substantial savings, who do not yet own an asset class. Almost no-one, and mostly young people. But low interest rates push money to seek higher returns, which causes investment to become speculative instead of seeking lower-risk capital improvements. This reduces future productivity gains, which lowers growth long-term.

In other words, the future is Japanification. Society will gladly sacrifice its children and future for a few more years of fun bucks. A decade long recession is, I believe, inevitable, and will happen after the next asset crash.

Everything you’re talking about only relates to the list price. I don’t know the right name for it. The value of the property. What you’d see on the for sale sign. You’re right about different levers on that.

The problem is that that’s not the price that matters in this particular setting. What matters are the monthly payments. If you change rates, the list price will change but monthly payments won’t.

> If you change rates, the list price will change but monthly payments won’t.

Exactly

If the buyer can only afford $1,000 a month with a 30 yr mortgage - that sets the upper bound of the list price of the asset

If rates rise the monthly payment stays the same, but the buyer can only afford a lower priced house.

If rates go down those $1,000 can now pay for a higher list price

If everyone keeps saying this long enough, eventually they’ll be correct. How many economists is everyone aware of who are themselves millionaires?

You know, you're not wrong. Inflated asset prices can last a long time. Fundamentals win in the end, but the end can take longer than a person's career.

"The market can stay irrational longer than you can stay solvent".

"When the music plays, you have to dance."

I'm just suggesting not to speculate with borrowed money.

Anything will “sell” if it is at the right “price”. If it isn’t selling, it isn’t at the right price!

Simply put, the market is what determines the wage employees will stick around for. The free market doesn’t give two shits about what any employer thinks is an “appropriate wage”. If you are offering $14/hr and employees are jumping ship after their fourth day for $18/hr, no amount of complaining and bellyaching about that not being “sustainable” will change things.

Tighten that belt and make cuts elsewhere - like your own take-home, which if it’s an industry standard, is likely several multiples of that employee’s wage in order to finance a McMansion on the hilltop and a Mercedes in the garage.

Remember - if you cannot afford to pay a living wage, you cannot afford to be in business. Asking people to work below poverty wages so you can own a business is entitlement at it’s finest: you are asking human beings to use their lives to subsidize your desire to own a business. If a job is worth being done, it’s worth being paid enough to live.

Many businesses exist that can't pay "living wages". That doesn't make them bad, or unworthy of existing. My wife owns a business. There were many years when she wrote herself paychecks but never cashed them. She pays better than most of her local competitors, especially for her more experienced workers. But its mostly unskilled labor that she hires. COVID cut her business demand by 90%. She has managed to hold onto 50% of her workforce.

> That doesn't make them bad, or unworthy of existing.

Yes, it does. Someone is making easy money on the backs of people who can't afford to live.

That's the beautiful part of the market economy. It supports ideas if the benefits outweigh the costs and let's ideas die if they aren't worth it.

There is no such thing as unskilled labor.

As mentioned by others (and I'm a very experienced chef and restaurant manager). You need to pay higher.

It's not sustainable? Pfft you think anyone else is magically getting cheaper? Raise your prices and cut your overhead, welcome to the game.

It appears you need to offer more money. Your wages have been deemed undesirable / unlivable and are thus uncompetitive.

Whether that is “sustainable” for your own cash flow was never the point.

Most unemployment programs require you to make and report a minimum of "two contacts" per week. You probably got used as one of the two required contacts, though the person was likely not interested in the job.

Is that true that most require this? I know people living in two different states on unemployment, and, to my knowledge, they aren't doing this.

It varies by state. There's currently no work search requirement to receive UI benefits in California, for instance.

Sounds like you should probably pay people a livable wage if you want them to work for you.

Oh is it that easy? /s

It is. In the scope of "how do I hire people" it is as simple as "pay them what they want".

How you work that into your business plan is harder, but you need employees for the business plan to work as all, so it still boils down to "pay them more".

While 100% on its face this seems a bit reductivist, it sounds like the argument I make about “just deal with the 30% App Store take or don’t make a business” which I guess I should revisit.

Sure this small bar could literally pay more but if that means their business model doesn’t work then that probably means many small bars/restaurants business model won’t work in the area (unless they have old/low rent). So does that mean you’re ok with all small places being replaced with TGI Fridays?

It's a harsh truth that businesses are not guaranteed that their business model will work. It's part of the reason that in my hometown (50k population, $600k townhomes) some 90% of restaurants (and small batch brewers/distillers) fold within a year.

But the 10% that succeed, are succeeding in the same environment as everyone else. They do so by offering food and an atmosphere that people want, and that you don't find in another restaurant in the area, even though the price is higher (significantly higher than TGI Fridays). Sure, there's also a good bit of luck involved, but that's hardly unique to starting and maintaining a business.

And what else would you suggest? Forcing people to work for $14? Prevent them from being sniped by other businesses for more money? They're already getting loans from the government to hire more people...

While traveling around to a few big and medium cities I get the sense that the market is already rationally killing off mom and pop shops in favor of Chain Burger, and I also get the sense that whether you’re in a small or big town, metaphorical Habit Burger is actually favored and more trusted to deliver a good burger.

It’s even more true with little apps on the App Store. Most tiny little apps actually hurt the Apple experience because they are unworthy and don’t have the reputation but still want your data.

Small shops don’t economically make sense except for very local concerns.

> a dishwasher, did not return on day 4 as he was offered a position at a larger restaurant for $18/hr. That is not a sustainable market rate we can offer

I don't think these guys understand what "market rate" means.

If you can't pay a living wage, you don't get to exist. The labor market goes both ways.

The tradeoff with this way of thinking is higher unemployment and taller barriers to entry for new businesses.

You're not wrong but higher unemployment helps push prices down. The economy is a huge collection of competing forces so answers are rarely so straight forward.

Or someone more adaptive and innovative fills your economic niche in a way that you couldn't by dealing with the market realities and investing in their employees. Capitalism is amazingly resilient to rising wages.

I think that works well in Tech, but I don't see how the OP's Beer Garden could possibly innovate and adapt their way into having the money to pay superior wages.

Well that's capitalism. Adapt and grow, or die. OP's business going under is not going to make the demand for beer gardens go away. Someone more efficient will fill it.

Labor has been forced to operate under the same rules for decades now. Don't like the minimum wage? Then starve. Or figure out a way to provide more value. A dozen other people will be desperate enough to take it. I've zero sympathy for business owners being held to the same forces.

This business needs some bootstraps!

Would it make more sense to have hyper flexible hours.

Say you pay 25$ an hour, but it's only 8 hours a week during peak ?

I think with the gig economy young people are used to only working when they want.

That's an interesting idea - an "Uber" for general work. You're vetted for having certain skills. A business needs workers having that skill from say 7pm - 10pm this evening. You can bid in your price. The business owner can then choose the worker they want at the price they want.

What I'm wrestling with is whether this is utopian or dystopian? That's why I say it's an "interesting" idea. I can see it appealing to some people and not appealing at all to others. Maybe there's room for both kinds of people in the labor market? Your "base" workers who are always there and reliable and the "peakers" who are taking care of your excess load at peak times?

This already exist.

https://www.snagajob.com/ I imagine it depends on your situation.

If I was 19 I'd love it. I'd hate living like this with a family to support

That’s not a market rate. How would you handle the remaining team’s wages? What do you do with that elevated rate if/when the job market returns?

> That’s not a market rate.

What do you think 'market rate' means? If you aren't able to hire for $14 but someone else is for $18... then $14 is clearly not the market rate and $18 is. That's what a market rate is - the rate things are selling for in the market.

> I assume they are increasing their hourly rate due to

Doesn't that maybe suggest that $18/hr is probably the current market rate then? My understanding of market rate is "amount at which the two parties are willing to negotiate", not "amount that the employer wants to lock in at, all other factors be damned"

If one can't afford to pay competitive wages, that may suggests they're not actually financially healthy enough to stay in business.

If you can't get a worker for the "market rate", perhaps the hard answer is that $14 is no longer the actual market rate, and you need to offer more money to get employees.

I live in a 50k poulation town, and $14 is not a living wage.

What do you mean when you keep saying “market rate?” You describe your competitors poaching your employees by paying them more, and saying it’s not fair because you can’t pay them that. Tough shit buddy! Sounds like you’re paying below market.

Same reason contracts pay more than salary.

If someone can Doordash, etc, and make more( while arguably dealing with less stress) they'll rationally do that.

Or since this is HN, can you automate some of these tasks ?

Increase prices? And if you are having a problem hiring how can you be sure you are offering market rate? The market rate has increased due to PPP1/2.

market rate is whatever people are willing and able to be paid to do the work at.

But what if the supply gets tighter ? The market rate must adapt (since it's a market). You may have to raise everyone or hire no one new, or vote for a communist 5-year plan.

Imagine if instead everyone wanted to work at your restaurant, EVERYONE, you'd fire your 6 guys and pay $2 their replacement, no ?

This exists, specifically for the industry (food service) OP is talking about: https://www.pared.com/.

I see all the negative comments but I'm asking this with genuine curiosity. Do high school students not really work any more? Maybe they legally can't at a Beer Garden, even if it's washing dishes?

When I was in high school I worked as a busser/dishwasher for a diner. I'm assuming you're in a high CoL state but what you are offering is above what I was paid after adjusting for inflation.

Would you wash dishes for $14? No? Neither would I. So why do you think anyone else would?

A little over a decade ago, I washed dishes for $7.25/hr. I applaud the wage hike, heh.

Sounds like you need to raise your prices so you can pay competitive wages. So... inflation?

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