WHY FOOD SERVICES & RESTAURANTS DO WELL IF MINIMUM WAGES GO HIGHER
By Wayne Roberts
This may sound too good to be true, but the step toward a $15 an hour minimum wage just might end well for the health and well-being of both food businesses and their customers in the general public.
The hue and cry about an impending crisis for a food service sector incapable of absorbing significant wage increases come from a narrow and unimaginative understanding of the potential benefits of upgrading standards in the food industry.
Indeed, it’s possible that minimum wage hikes toward $15 an hour will prove a major food success story of recent times. If so, it may confirm in the public mind what public health experts have long known — that justice, equity, and health travel well together.
This sounds counter-intuitive, especially in terms of how we approach food issues. It’s fairly normal to expect that if wages and costs go up, then costs and prices will too. As a result, many people see minimum wages for food workers as a win-lose issue — if it’s good for workers, it will be bad for consumers and the public.
But the evidence so far suggests that this old-fashioned win-lose way of looking at the world is wrong.
Alberta’s hike in minimum wages, as reported by one writer who based her case on Statistics Canada data, was quickly followed by an increase in the number of jobs in the foodservice industry.
The Bank of Canada doesn’t anticipate immediate job losses from increases in minimum wages, but it does predict that future job growth will slow, to the tune of as many as 60,000 fewer jobs. The media decided that was a big enough number to warrant alarmed headlines.
But a cooler look at the numbers shows this worst-case scenario isn’t quite as ominous as it sounds. To put 60,000 lost jobs in perspective, Canada’s economy creates that number of jobs every two weeks, a Toronto journalist commented. A blip, to be sure, but not exactly a crisis.
Negative impacts will be least relevant in the Ontario food industry, where a minimum wage hike was legislated in 2018. Farmers who produce dairy, egg and poultry staples are protected by supply-management systems and don’t need to worry about competing against businesses imposing low wages and poor environmental regulations in their communities. Likewise, people in the restaurant sector, who mainly sell to people in their immediate neighborhood, don’t have to worry about foreign competition.
With any luck, Ontario restaurants will be buoyed by the fact that over ten percent of Ontario workers just got a big raise, and now a new group of customers will have some spare cash to treat themselves to an occasional restaurant meal. According to one report, Ontario has an abnormally high rate of workers who earn minimum wage — about one worker in ten. That level of subsistence can be a drag on consumer-oriented sectors of the economy such as restaurants, which depend on lots of people having spending power.
One reason for the controversy is that people are used to thinking about the food policy as being a win-lose proposition. If it’s good for the environment, it will be bad for food prices, many people assume. Likewise, most automatically agree that if a change is good for workers’ wages, it will be bad for consumers.
In fact, today’s low-wage food sector suffers from a lose-lose syndrome. It’s a loss to have the entire food sector, the leading job creator in the economy, dependent on low wages and poor working conditions. It’s also, as I will explain, a costly mistake to have so much and so expensive ill-health delivered to the public as a result of having food produced by underpaid workers.
Moving from a lose-lose to a win-win approach to food policy and the food sector is the big opportunity that comes out of a reframing of this controversy about minimum wages.
The time is long overdue for a major reframing of our assumptions.
HOW TO RE-FRAME THE REAL PROBLEM AS A WIN-WIN-WIN
Here’s how I see a more helpful framing of the wage, health and economic issues in the food sector.
We need to shift from thinking about the cost crunch — supposedly caused by higher wages or environmental standards, for example — to the quality crunch of not making advances in social and environmental management.
The opportunity cost of focusing on the cost crunch is that we lose sight of the quality crunch that is harming our bodies and economy much more.
We got into this pickle in the first place because of government food policies that set the stage for a food service sector in which low wages dovetailed with low nutrients.
It’s my view that wages loom so large in the business survival picture because of government misdirection that goes as far back as the 1950s and 60s.
FOOD SAFETY NEGLECT AS COURSE OF LEAST RESISTANCE
During those years, food stopped costing a quarter of the income most people in North America made — on par with housing costs — and started sliding downward to today’s situation, where food costs about ten percent of the income made by most North Americans (and housing has crept up to 50 percent).
Since the 1950s, food prices dropped in lockstep with changes to food that made it cheap, convenient, fast, adulterated with sugar, fat and salt, and nutrient-deficient.
Governments across North America looked the other way at the mixed blessing of the terms of this invisible social contract with the food industry.
When we look back with the advantage of hindsight, it’s clear that governments weren’t prepared for the new food order, and were blindsided thanks to assumptions that More is Better, and Big is Good. Governments and voters alike thought the pivotal issue for food and well-being was getting enough quantity as possible for as little money as possible. They assumed quality would take care of itself, that it was somehow built into food.
Governments went along with, and literally paved the way for, changes in the food system that made the food industry more volatile, lower-paid (wages in food retail and meatpacking have dropped most precipitously) and less dependent on local supply. They didn’t anticipate that any savings in food costs would be more than offset by a rise in healthcare costs from poor-quality food. Chronic disease, in those post-1930s Depression and post- World War 11 days, were considered “diseases of affluence” — not, as we now know, diseases of deficiency.
Today, it’s all too clear what the social contract with Big Food companies has done to rates of chronic disease. But there may still be lack of clarity about what the runaway cost in the economy is. It isn’t the wages of food workers, which have declined for many — most notably meat-packers, food retail staff and farmers. It’s the rising of chronic disease, much of it the inevitable result of low-cost food.
That invisible social contract of the 1950s and 1960s led to today’s situation, in which the global costs of treating pre-diabetes and diabetes are getting close to two billion dollars a day.
How did such a bad deal get done? And how might improved minimum wages help undo it? Those are the questions the minimum wage controversy call on us to consider.
HOW LOW-COST FOOD GOT AROUND SAFETY REGULATIONS AND SAVED A BUNDLE ON LABOR COSTS
Basically, governments decided to under-regulate the food sector, by sticking to the tried and true of a narrow and obsolete understanding of long-established standards for food safety and adulteration.
In this imaginary, food was safe if it didn’t spread food-borne infectious diseases, such as the diseases arising from improper handling of food and inadequate control of bugs, microbes, and other creepy crawlies. And the food was pure, not adulterated, if it didn’t have non-food substances, such as chalk to substitute for white flour, and didn’t cause acute illnesses.
These were standards any junkfood purveyor could pass with flying colors.
Junk food products had no problem passing muster with food safety standards — as long as safety didn’t refer to foods that, over time, caused chronic diseases, or caused environmental pollution, which also leads to chronic diseases. And junkfood outlets adulterated with sugar, fat and salt, which didn’t turn stomachs the way typical cheap adulterants do.
The prevailing narrow understanding of food safety, adulteration and health protection gave the green light to the junkfood segments of the food industry.
The food industry had a free hand to push down the costs of labor in food production as the driving force of competitive advantage.
There were two ways to drive down labor costs. One was to mechanize and automate. The other was to deskill. The big global food corporations specializing in junkfood did both.
The smartest move on automation was to provide disposable paper and plastic wrappings and utensils. That switch in technologies eliminated jobs washing dishes.
No-one in government pointed out the cost of that automation trick. The trick was that companies no longer cleaned up after themselves but sent their packaging waste into the environment. Remains of the food and packaging waste sent to landfill eventually seeped into the water table or were released as gases in the air. Neither is a safe outcome, but safety regulations didn’t measure for that. (For an understanding of real cost accounting applied to such practices in Ontario, see this TV interview with some top experts.)
Deskilling was every bit as important as automation. That’s why deskilled, dead-end and mind-numbing work is referred to as a McJob!!
Deskilling didn’t have a noticeable impact on the taste of food, because the taste was supplied by three ultra-cheap ingredients, all of which can be classified as unsafe in large quantities — sugar, salt, and fat. (This substitution process is explained in the deeply insightful book by Michael Moss, on sugar, fat, and salt.)
Deskilled jobs allow employers to hire almost anyone off the street, not someone who came with training and expected wages to match.
And, of course, when the supply of acceptable labor is suddenly greatly expanded, the law of supply and demand kicks in, and wages go down to what a teen living at home can make do with.
That standard came to set the bar for wages in the food industry. As soon as labor is deskilled, which happens when health regulations don’t require a safe and health-producing product that has to be handled and prepared with care and skill, wages drop like a stone.
Wage standards in the junkfood industry are like the rotten apple at the bottom of the barrel. They soon infect every level of the industry, including diners, bistros, and restaurants on main streets, which often have to rely on reheating pre-fab meals provided by monopoly distributors such as Gordon Food Services and Sysco.
In short: what happened to food industry wages and working conditions was a result of the vacuum in government health and safety regulations.
That’s where we’re stuck today, and that’s why there’s such distress caused by the prospect of increased wages in the food sector, a leading employer across the continent.
Governments now have to intervene to prop up wages only because they missed the chance to regulate junkfood for comprehensive food-based healthfulness and safety. They now have to wag the dog by the tail and raise the bar for industry standards by the duller tool of minimum wage laws. (For an understanding of the real costs of food in an Ontario context, see this TV interview with some top experts.) If they had regulated health promotion standards for food instead, higher wages would have been the natural result because more highly skilled and valuable labor would have been required.
BRING ON THE QUALITY CRUNCH
The only losers in the aftermath of higher minimum wages may well be global food chains that lose their pivotal competitive advantage — low-waged employees producing and serving low-quality food. The winners may well be independent businesses that invest in employee wages instead of corporate marketing and franchise fees.
That’s the change to watch for, not the decline of an entire industry.
With proactive food safety regulation, there’s no logical reason why restaurant prices would have to rise. There’s no reason why governments can’t afford to incentivize changes in the food sector, and finance these incentives out of massive savings in healthcare.
I propose that the foodservice sector be identified as a health-promoting industry, which would entitle companies to major tax deductions equivalent to the savings they generate for the public in terms of healthcare spending.
Foodservice is ideally poised to be identified as a health-producing industry. Working at restaurants is almost a rite of passage for young people, who pay a portion of their way through school by working in the food space. Entire populations have a direct experience working or eating in the industry. Half of all North American meals are now eaten away from home.
The devil would be in the detail, to be worked on by food policy, health policy and tax policy experts. But the trajectory is clear.
Measurable healthcare savings would come to the population and to governments in two major ways.
One is through the reduction of unsafe foods that cause chronic disease.
As a consequence of governments deregulating the broad field of food safety, the costs of chronic disease are skyrocketing everywhere in the world. Global costs for the management of chronic disease will be in the area of $47 trillion a year by 2030, according to best estimates.
In the US, the healthcare industry is now the largest employer, in case anyone’s worried about ballooning costs from the food sector.
And foods that cause such damage are not classified as health and safety hazards?
The other way of paying for higher wage and quality standards through healthcare savings would come about indirectly.
If food service workers need to take basic food health and safety courses in order to qualify for a food service job, their certificate would give them qualifications that would both raise their wages and raise the quality and health outcomes of their work.
As important, the training would have lifelong impacts on the health and safety habits of former food service workers.
I have to confess that a big chunk of what I’ve learned about doing the dishes and cleaning up after meals came to me quite recently via my daughter, who learned these skills as a condition of getting her food service job when she was an undergraduate at university. She’ll have these skills for her life, and has passed them onto me, and I can now pass them on to my granddaughter.
I don’t know what percentage of food-borne illness would be affected by extending workplace learnings into the realm of daily life.
But the big point to know about food is that any food-related number is going to be very big.
The US, for example, records about 76 million foodborne illnesses a year. The cost of food-borne illness there comes to about $152 billion a year.
The impact of improved food quality and food service training can’t help but have an impact on billions worth of savings.
It’s unfortunate that governments have to go at the problems of the low-waged food industry ass-backward — starting with wages, rather than regulations of health standards.
As a result of going about it ass-backward, a number of wonderful food companies will suffer over the short and medium-term.
Many food companies, set up as social enterprises or social purpose organizations, have done their best to stay competitive with the price point set by junkfood companies, even though the cost of junkfood ingredients and labor inputs are so much lower.
Legit food companies, already paying top dollar for ingredients and labor skills, may face problematic cost pressures in the short-term, and will need support from loyal customers who can pay a bit more to support the threesome of good ingredients/high labor content/well-paid workers. These struggling companies should not lose out because of the government’s historic mistake of starting off with increased wages across the board, in the absence of requirements around increased healthfulness of food. Both governments and customers need to look for ways to help them through an adjustment period.
But that leads to a bigger problem of food disconnects. American food writer Wendell Berry once explained the mess we’re in as having “a food system that doesn’t care about health, and a health system that doesn’t care about food.”
That’s the world we live in, and so we must go-forward ass-backward. We’ll still get through it, and be the better for it.
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