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October 31, 2022

According to the Bureau of Labor Statistics, the food industry has one of the lowest unionization rates in America – 1.2% compared to 10.3% nationwide. But from Starbucks to Chipotle, service workers across America have started a movement to increase that percentage.

It’s not hard to understand why.

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The BLS reports that the median full-time union worker earned $1,169 per week in 2021. The median non-union worker earned $975. However, it’s not just about salaries.

Since the beginning of the 20th century, unions have fought for better conditions, decent working hours, more benefits, a safer work environment and job security. However, all this costs money, which will inevitably be passed on to the customer. So how much will it cost patrons if the service industry union movement achieves its goals? Let’s take a look.

First, Understand Which Service Workers Are Organizing

The term “service industry” might make you think of your local bartender or restaurant server, but tipped service professionals don’t insist on unionization on a large scale—and they’re in a unique category of the American workforce.

They can be paid as little as $2.13 an hour as long as they make more than $30 a month in tips, and according to The New York Times, tipped employees are especially hard to unionize. Organizing work requires time and dedication, and turnover in restaurants and bars is particularly high. Also, divisions between back-of-house and front-of-house employees complicate negotiations, and since every restaurant operates differently, there is no way to write standardized employment contracts.

Chances are, nothing will change at your local pub or coffee shop.

“It’s important for independent restaurateurs to note that these unionization efforts are almost entirely focused on large chains and franchises like McDonald’s and Starbucks,” said Mary King, a restaurant analyst for Fit Small Business and a 14-year restaurant veteran who worked in every aspect of the industry.

“Brands whose profits have been growing for years, while the wages of their first workers have changed little. Union pressure certainly wasn’t the first time these brands learned their staff felt undervalued. Unionization takes a lot of time and energy. Front-line service workers have neither in great supply. So you have to wonder how desperate union baristas and cashiers must feel if they are willing to go to the lengths of full unionization.”

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The $22 Red Herring

So even if unionization doesn’t affect your neighborhood restaurant, it could affect a large corporate chain with a drive-thru. So how will prices change there?

King cited a recent study by the University of California, Riverside, which found that consumers can expect price increases of 7% to 22% if service worker wages rise above $22 an hour.

“Most of us wouldn’t notice a 7 percent increase, but 20 percent or more could encourage consumers to shop less or dine out less often,” she said.

However, $22 is an exception that does not represent the goals of a larger movement. That number comes from notoriously expensive California, where Gov. Gavin Newsom recently signed legislation protecting fast-food workers.

The Quick Recovery Act created a council to oversee wages and working conditions in that specific industry in that state. The council has the power to raise the state’s minimum wage in fast food to as much as $22 — but it still hasn’t, and there’s no national movement pushing for the same wage across the industry.

The Movement Is About More Than Money

According to Forbes, the movement that led to the Quick Recovery Act was born during the pandemic, when stories surfaced of fast food workers working in unsafe conditions. Some were forced to work nearby at the height of the COVID scare and were told to use coffee filters or dog diapers as masks.

Banning such practices will not make your fries more expensive.

“It’s not just about wages in unionization,” King said. “It’s about a fair schedule, enough time for rest and health benefits. It is entirely possible that union efforts will focus on these issues rather than just pushing for higher wages. Fair schedules and reasonable vacations are unlikely to have an impact on costs.”

Prices Are Rising, but Not Because Workers Are Overpaid

The service-industry union movement is gaining ground across the country, and customers are paying a lot more for their coffees, burritos and salads, but in times of high inflation, it’s not a direct cause-and-effect relationship.

“Keep in mind that in addition to potential wage increases, restaurants face rent increases, fuel surcharges and higher prices for basic ingredients like flour and bread,” King said. “It is very likely that the price increases will come from those increased costs, and not least because some restaurants may be required to pay their staff higher wages.”

Some argue that restaurants will be forced to close when higher labor costs drive them out of business, but there is little evidence of that in cities that have served as canaries in the coal mine.

“Minimum wages went up for restaurant workers in San Francisco, Seattle and Los Angeles a few years ago, and we haven’t seen the increase in restaurant closings that was predicted at the time,” King said.

Rising Prices Aren’t Always a Side Effect of Unionization

A common misconception is that unionization leads to higher wages, which will inevitably lead to higher prices – but history shows that this is not always the case.

“It’s important to note that workers at many hotels have been unionized for years, as have workers at big-name stores like Kroger,” King said. “Employees at Macy’s, Bloomingdales and H&M are also unionized. Yet somehow we’re not seeing the price increases in those stores that restaurant brands say are on the horizon if restaurant workers unionize.”

She concluded: “I’m not saying that prices won’t have to rise somewhat to cover the increased costs, but I’m not sure that wage increases will be entirely to blame if prices rise.”