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Wednesday, October 10, 2012 2:02 PM

Prepping for Obamacare, Olive Garden and Red Lobster Cut Workers' Hours; Are Other Companies Doing the same? Tip Sharing Lowers Minimum Wage; Like One, Like All?

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In hopes of reducing the impact of Obamacare, Olive Garden and Red Lobster are reducing hours and studying the impact.

Right now, this is just a small test, involving only four stores markets. However, if large chains are testing in that direction, no doubt other companies are doing the same. I also suspect smaller chains have already shifted to that model completely.

Please consider Prepping for Obamacare, Chain Cuts Workers' Hours.

The owner of Olive Garden and Red Lobster restaurants is putting more workers on part-time status in a test aimed at limiting the impact of looming health coverage requirements.

Darden Restaurants declined to give details but said the test is only in restaurants in four markets across the country. The test entails increasing the number of workers on part-time status, meaning they work less than 30 hours a week. Under the new health care act, companies will be required to provide health care to full-time employees by 2014. That would significantly boost labor costs for businesses.

About 75 percent of Darden's employees are currently part-timers.

Given the challenging job market, Darden has been able to offer lower pay rates to new hires. Bonuses for general managers have been reduced as sales have stagnated. Servers at Red Lobster are handling four tables at a time, instead of three.

And last year, the company also put workers on a "tip sharing" program, meaning waiters and waitresses share their tips with other employees such as busboys and bartenders. That allows Darden to pay more workers a far lower "tip credit wage" of $2.13, rather than the federal minimum wage of $7.25 an hour.

Darden isn't the only restaurant chain looking at managing labor costs.

This summer, McDonald's Chief Financial Officer Peter Bensen noted in a conference call with investors that the fast food company was looking at the many factors that will impact health care costs, including the number of full-time employees.
Like One, Like All

There you have it, right at the end. McDonald's is looking at part-time work as well, hoping to avoid the impact of Obamacare.

Are any major restaurant chains not doing the same thing?

So, let me repeat the same questions I asked on Tuesday: Is Obamacare Responsible for the Surge in Part-Time Jobs? What About Obama's Defense Layoff Suspensions?


In response to the above article "StockBuzInvestors" wrote ...

Hello Mish

Having one last 19 year old who hasn't flown the coop yet, I took it upon myself over the last year to help him and his numerous friends look for work down here in sunny Dallas.

Here are a few observations.

  1. Companies have cut back as many employees as possible to under 32 hours so as to avoid having to pay any benefits
  2. Christmas hiring actually began in September and is winding down in mid-October. It is definitely ahead of schedule.
  3. Temp agencies are having a field day, absolutely flooded with applicants and temporary, not full time permanent positions.

1, 2, 3
More Like 1-2-3-4

  1. Outlier that will be revised lower, later
  2. Reversion to mean from three previous bad months
  3. Early Christmas Hiring
  4. Obamacare

I suspect all of those came into play. Assigning appropriate weights is not a simple task.

For more discussion, please see Mish on Capital Account: IMF Downgrades, Unemployment, Participation Rate, Conspiracies; What is the Best Way to Measure Unemployment?

Mike "Mish" Shedlock

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