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Kevin Rezvani grew up in the kitchen: spending summers at his grandfather’s bakery in Japan, work-study in his college cafeteria, and working for years as a line cook in mid-tier restaurants, plus some work in fast food .
In his late 20s, the biggest lesson Mr. Rezvani learned from his experience “working in all kinds of things in food” was the industry’s potential in reconciling the art of the kitchen and the science of restaurant business with the mathematics of Widespread disability. Business.
He says many enterprises are not profitable enough to support all the hours required for managers and employees to stay on the job, let alone grow. In other words, they lag behind in productivity.
“There’s a very fine line between doing OK and doing well in this business,” said Mr. Rezvani, now 36. “And if you’re doing fine, it’s not worth your time.”
A few years after graduation he and two partners opened a casual sit-down restaurant near Rutgers University. But in early 2020, he separated from her due to personal and professional differences, and he was left alone.
To pay the bills, he worked for a moving company and delivered for Amazon, which was booming during the lockdown as people sitting at home spent their disposable income on buying goods.
Mr Rezvani said these types of businesses are disorganized, lean and strict about how many machines or working hours are required per order. Looking for a second attempt at opening a restaurant, he made maximizing output his North Star: “I was like, ‘I have to make this whole thing more efficient.’ It’s a business at the end of the day.”
In early 2021, he spotted a restaurant space for rent on East Seventh Street in Manhattan’s East Village neighborhood. The landlord, desperate for tenants after the pandemic closures, gave him and his new partner a discount. He had to work very hard to collect the security deposit, but he was confident in his bet.
“I’ve maxed out my credit card,” Mr. Rezvani said. “And it became a hit.”
Featuring a minimalist menu, hole-in-the-wall square footage, and a limited set of ingredients and products, 7th Street Burger debuted in May and immediately made a splash. From 40 employees 16 months ago, it has grown to a chain with 330 employees across 13 locations and plans for national expansion.
Mr. Rezvani argues that some of the city’s luxurious, full-service restaurants, with long lists of overhead costs, fluctuating workforces and rarely chosen sets of menu options, are “making 200 bucks an hour” in sales. But on a good day, he can make $2,000 an hour “with three people on the grill, three items on my menu and nine ingredients in my restaurant.”
“We are a cash machine,” Mr. Rezvani said.
looking for win-win
7th Street is a success story of sorts that exemplifies the nascent surge in productivity that the U.S. economy has experienced over the past year after declines in 2021 and 2022.
Economists typically measure productivity as a simple ratio: the total amount of output an economy produces per hour worked by its labor force. On that score, productivity is set to grow 2.7 percent in 2023, according to the Bureau of Labor Statistics, and has been growing at more than double the rate from 2005 to 2019 over the past two quarters.
At a less technical level, productivity can usually be explained by the old principle of “doing more with less” or the popular virtue of “getting the biggest bang for your buck”.
Economists breathe a sigh of relief whenever they see an increase in productivity, because it offers a potential win-win for workers, customers, and business owners: If businesses can make more money or more with fewer working hours, – According to standard economic reasoning – they can earn more per hour, reinvest in operations and pay workers a little more without sacrificing profitability (or rely on price increases to push profits higher ).
As Joseph Brusuelas and Tuan Nguyen, economists at consulting firm RSM, said in a note in late January: “U.S. productivity growth over the past year, if sustained, is a potential game changer for the economy that is far from being that mythical.” represents growth.” The tide that raises everyone’s standard of living.
In recent history, the trade-off between increases in productivity and increases in employee pay has been uneven. Many economic models suggest that if workers began doubling their daily or hourly output, they would be likely to get paid roughly twice as much as before. However, from 1979 to 2022, productivity growth more than quadrupled the inflation-adjusted 14.8 percent increase in compensation of average nonsupervisory workers in the private sector, who make up about eight out of 10 people in the labor force.
Yet, so far in this cycle, productivity has acted like a secret sauce, helping the other elements of what analysts call a “soft landing” co-exist: slow inflation, strong economic growth, Strong wage growth and unemployment near record lows.
“Pandemic-related labor shortages have forced many businesses to think about how they can use labor more efficiently,” said Dean Baker, an economist at the Center for Economic and Policy Research, a labor-focused think tank in Washington. ” “So I’m going to be a productivity optimist for the first time in my life.”
A growing number of companies in finance, manufacturing and transportation logistics are introducing digital tools – even those without cutting-edge AI features – promising to work “not harder, but smarter” and cut down on the drudgery Appears to have been done.
Ycharts, a company founded in 2009, sells a platform on which users visualize complex financial market data, then create attractive, customizable charts and portfolios. Following the recent update, the company reported that its customers at financial advisory firms are saving an average of more than a dozen hours per week on the busy work of data analysis.
There has also been a rapid overall shift towards corporate belt-tightening since 2021, in response to increased borrowing costs due to higher interest rates or an expected slowdown in sales. And this has affected many investors as well as entrepreneurs who were part of the business creation boom that began in 2020.
“There is more pressure than ever on businesses to achieve profitability as quickly as possible,” said Katie Tyson, 37, founder of Hive Brands, a new web retailer that manages, tests and sells sustainably-branded food and wellness products. Does.
Although she calls Hive a “child of the pandemic,” having launched in 2020 when borrowing was still very cheap, “We’ve been very cost-conscious, I think in a way like 2010s start-ups. Were not,” Ms. Tyson added. “It is no longer growth at all costs.”
Businesses also appear to be responding more quickly to changing consumer habits. For example, a greater emphasis on delivery and takeout orders has increased profit margins in many food businesses. Retail analysts report that better targeted advertising and the rise in e-commerce have helped companies large and small. And proponents of hybrid and remote work options argue that these models reduce hours wasted in commuting and help executives employ the best talent pool regardless of location.
fruits of a tight labor market
Data on productivity can be misleading. Its basic calculation – production per hour – worked best when America was an industrial and agricultural society, producing primarily bushels of wheat or nuts and bolts for manufactured goods, versus hard-to-quantify Service-oriented consumption is what makes up the majority of today’s economy. ,
Data can be particularly misleading when measured over a short period of time.
For example: Did the entire US economy really become 20 percent more productive in the second quarter of 2020 on an annualized basis, as a face-value reading of the data suggests? Or was it just that millions of workers were laid off in a matter of months while the economy contracted only slightly, making the simplified ratio of output per worker look artificially better?
Apparent leaps in efficiency may also disappear in official statistics, or lag behind for years. In 1987, Nobel Prize-winning economist Robert Solow said that “You can see the computer age everywhere except in productivity statistics.” (A brief surge was seen in the late 1990s and early 2000s before numbers declined.)
In 2016, Hal Varian, Google’s chief economist, told Bloomberg: “We’re certainly not measuring productivity correctly — but then again, we also didn’t measure it correctly before. So are we doing a worse job of measuring productivity than before? “I think there are some arguments that suggest we are.”
Looking ahead, a range of market analysts are claiming that a key turning point in the broader productivity improvement so far has been the unemployment rate near record lows.
Peter Williams, an economist and managing director of investment strategy and quantitative analysis firm 22V Research, wrote in a recent note that “companies have been forced to innovate and adapt in an environment of tight labor markets.” He said that for many companies, “relying on low-cost labor and low-cost capital is not really an option anymore.”
When a company needs to make every possible effort to maintain sales, using layoffs to improve profits can have the opposite effect. Instead, improving efficiency rather than reducing headcount often becomes a better growth engine or competitive edge.
Maintaining productivity growth close to current rates may require efficiency gains from AI technology and continued taming of inflation, although many Wall Street analysts are confident that both can happen.
For some labor economists – who have seen the past few decades take back the largest share of productivity gains to shareholders and business owners, while wage gains have declined – the primary question in the near future is whether workers will get a bigger share of the pie. Will be able to get at this time.
Katherine Anne Edwards, an economic policy advisor and an associate at the RAND Corporation, worries that future productivity gains may be attributed primarily to technology innovations, not worker input or ability, leading to a reduction in average wage growth. Comes, which has recently managed to make the leap.
“Wages are determined by either strength or productivity,” Ms Edwards said. “The low wages that so many workers receive are based on the assumption that people are only valued for what they bring. And how is that value actually measured?”