Is gentrification contributing to labor shortages for small businesses in Austin?

Chris Strader at Conan’s Pizza is having trouble filling job openings, according to a recent story in the Austin American-Statesman. As a small business owner in a fast growing economy, Chris is probably not alone: the unemployment rate in Austin has been under 3% for 20 of the last 24 months. But to what extent can Chris’ hiring difficulty be attributed to “macro” trends in the local economy versus something happening at a more “micro” level? Is gentrification, for example, contributing to a labor shortage for restaurants like Conan’s?

Let’s look first at the workforce situation. There are about 34,000 residents of the city of Austin age 16 or older working in food preparation and serving occupations, according to the latest available estimates from the Census Bureau. With median annual earnings of about $19,800 these workers are among the lowest paid in Austin. However, wages in those jobs are up due to a combination of very low unemployment in the local economy and increasing demand for workers due to the growing number of restaurants and bars—Travis County is averaging nearly 70 new eating and drinking businesses per year, according to data from the Texas Workforce Commission. Real (inflation adjusted) earnings for Austin residents age 16 or older working in food prep and serving have been growing at about 2% per year, which is not much but does rank among the top-tier of occupations based on the rate of growth.

So, yes, economy-wide and industry-specific conditions are, undoubtedly, having an effect on labor availability at Conan’s and other small businesses in Austin. But what other factors could be at play?

Conan’s is located in 78757 at the intersection of Burnet and Anderson. I think most people familiar with the area would agree that, despite a few notable new tenants, commercial development looks roughly the same today as it did 15 years ago. Retail and food services have gained a few percentage points in share of total employment, and, like most places, there are more people working in professional services today. But the structure of the local economy has not changed much. According to data hosted by the Census Bureau, total employment within a one-mile radius from the Burnet/Anderson intersection in 2017 was not much different than what it was in 2002. It dipped temporarily during the recession, but for the most part has ranged between 11,000 and 12,000 jobs. The employees in those jobs today are, on average, older and more diverse than they were before, but nothing in the publicly available data stands out as differentiating trends in the Burnet/Anderson area from Austin overall.

That is, until you look at where those employees are coming from. The folks at Conan’s would have to weigh in on how much they’ve been able to rely on Allandale, Crestview and other surrounding neighborhoods for employees over the years, and whether or not that has changed recently. But my guess is, it has. In the years leading up to the last recession, households in the immediate labor market area—defined here as 78731, 78752, 78756, 78757, and 78758—supplied an average of about 1,300 employees to businesses located within a one-mile radius from the Burnet/Anderson intersection. By 2017, that number was down by 14%, equivalent to nearly 180 fewer employees drawn from those surrounding neighborhoods. That might not sound like much in the context of 11,000 or 12,000 total jobs, but for a small, long-time neighborhood business that needs to hire just a few more employees, like Conan’s, it could be quite significant.

Indeed, employers in the Burnet/Anderson area are increasingly dependent on workers commuting from greater distances. In 2002, 48% of employees working within a one-mile radius from the Burnet/Anderson intersection lived less than 10 miles away. By 2017, that was down to 42%. For industries with larger percentages of younger, lower-wage employees—the median age for food prep and serving workers is under 30—longer commutes could certainly be contributing to labor force availability challenges. With the increasing demand for workers from the 70 new restaurants and bars every year in Travis County, why sit in traffic and incur higher costs for commuting to a job in the Burnet/Anderson area if I have another comparable option closer to home? Here’s a map of the five neighborhoods sending the greatest number of workers age 29 or younger to the Burnet/Anderson area in 2002:

2019-09-04 Home locations of 29 and under workers in 1-mile radius of BA intersection top 5 CTs 2002.png

Here’s that same map in 2017:

2019-09-04 Home locations of 29 and under workers in 1-mile radius of BA intersection top 5 CTs 2017.png

In the Statesman story, Chris mentioned that half of the applicants who respond to interview requests for jobs at Conan’s don’t show up. Perhaps they’re stuck in traffic.