Paying the Grocery Bill
Negotiations Continue Over a Two-Tier Pay System at the Area’s Three Biggest Supermarket Chains
Los Angeles City Beat- March 22 2007
By Mindy Farabee

This past Monday, another contract extension slipped by – and another three-week extension was quickly put in place – leaving tens of thousands of local supermarket employees working without an agreement. Unions representing employees at Albertsons, Vons, and Ralphs, the biggest supermarket chains in the L.A. area, are asking that a two-tier system, in which new hires work alongside veteran employees for sometimes half the pay and none of the benefits, be abolished. So far, the supermarkets are saying no, citing skyrocketing healthcare costs and increased competition. If this sounds familiar, that’s because it’s 2004 all over again.

Two years ago, these same issues came to a head and resulted in a bitter, 139-day strike that left workers on the verge of financial collapse and their employers $2 billion in the hole. In its aftermath, at least a quarter of employees didn’t come in from walking the picket line, which additionally heaped high retraining costs on employers. In fact, the only parties who really benefited were smaller, independently owned markets and burgeoning chains with more socially conscious images, like Trader Joe’s and Whole Foods (ironically, neither of which is unionized). No one seems eager to revisit those bad old days, but as of yet, neither does either side show evidence of caving.

It’s simple economics, according to the corporations. More and more big-box behemoths like Wal-Mart and Target are entering the grocery business, and Adena Tessler, a spokesperson for the supermarkets, maintains that even without offering full service shopping, these retail giants are selling twice the volume of the grocery chains, placing heavier pressure on an industry with notoriously slim profit margins. To add insult to injury, just recently, Tesco, the UK’s largest grocery retailer and the world’s fifth largest, announced its intention to move into the Southern California market, and Tessler says they’ve already snapped up a distribution center in Riverside. “They’re another monster,” she says, “And they’re non-union.”

Southern California, however, is still one of the easiest places to avoid shopping at Wal-Mart. With its tarnished image and controversial business practices, the retailer has stumbled badly in its attempt to infiltrate urban America, with the community anti-big-box uprising in Inglewood being a particularly noteworthy example.

“Wal-Mart was the excuse last time and it no longer resonates,” says Roxana Tynan, deputy director of the Los Angeles Alliance for a New Economy, a pro-labor organization working closely with the grocery workers. “They threatened 40 stores, and they got a handful. There was a lot of community pushback from exactly the same coalition who is here saying to the Big Three, ‘Do the right thing.’”

The Big Three bounced back, albeit painfully, after the last strike, ultimately ?11 not only mostly recapturing, but in some cases expanding their market shares and racking up record profits averaging between $2 and $3 billion. Pro-labor groups have noticed that sales have been good enough to justify impressive raises among CEOS and their management, and that Angelenos aren’t likely to stop buying groceries any time soon. They also note, however, that the affected chains did lose hundreds of millions in profits as shoppers refused to cross the picket lines, evidence that, for many, low prices aren’t the bottom line.

Kroger itself, locally known as Ralphs and nationally the nation’s largest traditional grocer, has said as much. In announcing that their overall profits jumped 36 percent in the last quarter, the company said, in the 32 major markets wherein it competes directly with Wal-Mart’s Supercenters, Kroger’s market share went up in 26, lost ground in only five, and held steady in one. They’re chalking their increased sales up to discounts and improved selection, but also customer service, and the unions would like to see that last item show up in members’ weekly paychecks.

Labor advocates are also trying to draw attention to contracts recently signed with Gelson’s and Stater Brothers, two smaller and more regional chains that together account for some 12 to 15 percent of the local market, and who, they say, have agreed to abolish the two-tier system. But according to Tessler, that’s not entirely accurate. “They didn’t eliminate any part of the two-tier system in their health and welfare package,” she says. Rather, what they signed on to, she adds, was a “me too” agreement, meaning that their own benefits will be tied to whatever the Big Three settle on.

“Prior to 2004, it was a very unique contract grocery workers had here in Southern California,” Tessler says. “This was one area of the country where the unions hadn’t agreed to a multi-tier system.” She adds, “In a world where three out of four Americans pay into their health insurance, more than 50 percent of grocery workers still don’t pay anything.”

Still, the public seemed to respond to the 2004 strike in a big way, avoiding the affected stores, and they will doubtless be sympathetic to any further action to gain health benefits. Spiraling healthcare costs and dwindling employer coverage are two reasons that L.A. County’s public health system is overtaxed and eating up billions in taxpayer dollars. In fact, in the wake of high profile studies and hard economic experience, the country seems to be waking up to a renewed class consciousness, a message that seems to be trickling up even as far as the rarified air on Capitol Hill.

At the end of January, the House Ways and Means Committee, the Joint Economic Committee, and the House Education and Labor Committee all held hearings on the wants and needs of the ever-vanishing American middle class. Granted, the hearings lasted exactly one day, but the fact that they were held at all made national news and registered a reversal of the Bush administration’s stop-your-whining policy. It remains to be seen whether presidential candidate and former Senator John Edwards gets much traction with his campaign this time around, but that he is anchoring it with a message of lowering poverty rates and trumpeting organized labor shows that either he’s hopelessly out of touch or tapping into a shifting mood in the country.

Last time around, the union and management battled it out mano a mano, but this time around, the union kicked off their campaign with some PR savvy, enticing some 10,000 Albertsons customers to sign a petition showing solidarity with the workers. This happened partly, Tynan says, because the tribulations of the country’s middle class “is a conversation we’ve been having a lot in Los Angeles, and it resonates here because we have one of the biggest income gaps in the country.”

“I think people [in Los Angeles] really see that they are one catastrophe away from not being able to pay the mortgage,” she continues. “Customers are saying, ‘I recognize that experience,’ and that’s not right in an economy that’s doing well and making money. And, in the long run, it’s not a smart business model, because [the stores will] end up with a community of folks who can’t afford their products.”

Southern California is just the first in a wave of contract negotiations that will roll into Northern California and the Seattle area later this year. More than 65,000 workers will be directly affected by the outcome of these talks.