We’re not sure why people were shocked by the predictable outcome of Long Beach’s decision to dramatically boost the hourly pay of grocery workers during the pandemic. After the vote, Kroger announced the shuttering of “long-struggling” Ralphs and Food 4 Less locations.
That mandate ends up hurting hourly workers and the customers who relied on those stores to buy groceries.
Long Beach is one of several California cities to pass “hero pay” ordinances that temporarily boost wages by at least $4 an hour for frontline workers. Even as the state loosens its COVID-19 stay-at-home restrictions, city councils are adopting these measures on an emergency basis. They mainly are union-backed efforts to circumvent minimum-wage laws.
Oakland officials argued that the pay rules are necessary to protect the vital food-supply chain by ensuring a stable work force. This may be news to Oakland officials, but the pandemic has been raging for nearly a year. Despite early supply chain problems with toilet paper and few other staples, grocery stores and their workers have handled the crisis with remarkable acumen.
Indeed, Kroger explains that it immediately boosted pay by $2 an hour and spent $1.3 billion on coronavirus-related safety measures so that stores could stay up and running. Local officials, who often struggle to handle their basic tasks, are the last people Californians should want to manage something as important as our food supply.
The biggest current threat to the supply chain comes from these proposals. Not many industries can endure a government-imposed labor increase of as much as 33%. A study commissioned by the California Grocers Association (CGA) found that Los Angeles’ $5-an-hour proposal “would be twice the size of the 2020 industry profit margin and three times historical grocery profit margins.” Grocers can’t stay in business if they’re losing money.
Everyone appreciates that grocery store workers have been showing up at their jobs despite the spreading pandemic, but it makes no sense to reward them with unaffordable wage boosts that will only precipitate stores’ move toward automation. That trend already has rapidly been taking place following California’s latest minimum-wage surges.
By the way, the CGA study found that Los Angeles’ $5-an-hour hero pay measure could eliminate 7,000 jobs, while Long Beach’s $4-an-hour boost is likely to eliminate 775 grocery jobs. Real jobs are at risk. And if stores don’t eliminate positions, they could be forced to cut hours by 22% — or increase the price of groceries by 4.5%. The latter amounts to a hefty tax on Californians, and will particularly harm those with low incomes.
These ordinances target large national or regional grocery store and drug chains with hundreds of employees. Union activists don’t always understand economics, but they should recognize that imposing a wage burden on stores where their members work will incentivize consumers to shop at smaller, independent markets that are non-unionized.
After Kroger announced its Long Beach closures, the head of a local activist group blasted the company for “attempting to deny their workers the compensation they deserve,” as KTLA reported. Sorry, but the public deserves to know that there’s no such thing as a free lunch. These “hero” pay proposals will only destroy profit margins, which will shutter grocery stores, obliterate jobs and drive up food prices.
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