The grocery strike is (probably) over after nearly 5 months. While it was a Pyrrhic victory for the stores, as they lost billions in sales, hundreds of thousands of customers, and reduced their already minimum public goodwill, it was a disaster for the union members.
After 5 months, the union settled for a pact that still contains the fractious two-tier wage and benefit scale, with only modest recovery on the health insurance front. Considering that workers had to live on half pay for those 5 months, each union member returns with little better than the original proposed contract, plus $5K-$10K in lost wages, mostly rolled into high-interest debt.
The Los Angeles Times has an excellent article today on the issue of two-tier wage scales -- an article that they should have published 4 1/2 months ago, but, being the Times, didn't. As I posted way back when, two-tier systems are inherently bad for all concerned. Not only do they create vicious divisions in the workforce, tempt management to lay off older workers, deny them overtime and generally favor the cheaper employees, but they create an internal partisanship that destroys worker morale.
On Friday, some UFCW veterans expressed dismay at the situation. They said a two-tier system would paint targets on their backs: Why would a manager, with his or her bonus tied to saving money, offer first-tier employees the chance to earn premium pay by working Sundays and holidays when bringing in a second-tier worker would cost so much less?The Times article also examines the history of two-tier, which was popular in the 80's but whose effects have led management to rescind most of these plans. Unequal pay for equal work is unworkable from nearly any viewpoint:
"I'll get my regular pay," said Rick Hernandez, a 29-year-old meat clerk from Venice, "but they might cut my hours because that would be the cheaper way to go."
[Stater Bros. Chief Executive Jack] Brown also said he would never ask store managers to show preference for new hires over veteran workers just to save money. "It would violate the trust we have here," he said.
Two-tier contracts had widespread appeal in the 1980s, when deregulation and globalization began to squeeze large, established companies. They demanded concessions from unions, and unions found cuts easier to swallow if members already on the payroll were spared the brunt of them.Regardless of the history, however, two-tier is a strategy the stores are pursuing nationwide, and, given the UFCW's balkanized structure, is winning in contract after contract. Look for more strikes elsewhere this year.
But most two-tier plans didn't last.
In 1985, for example, two years after American Airlines pioneered the dual structure in its contract with pilots, the union threatened to strike, saying the 50% wage gap between old hands and newcomers created conflict. The gap was narrowed through subsequent contracts and eliminated within a decade.
A bigger problem, at least in the urban California marketplace, is the growing labor cost difference between the unionized clerks and costs in the nonunion economy for workers with similar skills. Ultimately unions work when they provide value commensurate with cost. Let's examine this from the stores' vantage point, with respect to their competitive environment.
In the Los Angeles market, the stores have functioned as an efficient oligopoly, through consolidation of numerous small chains into the three national chains that dominate the market (and with some smaller operators riding on their collective bargaining coattails.) They have created an effective barrier to entry because they have wrung incredible efficiencies out of their non-labor costs -- purchasing, warehousing and distribution. Since they have essentially identical labor costs, they compete in other ways, passing along the labor cost differential to the consumer. Their other efficiencies still afford them a barrier to entry against most non-union competitors. So far, so good -- until a well capitalized competitor with a lower cost business model is induced to enter the market. Wal-Mart is that competitor. (As an aside, others are test-marketing large-footprint ideas elsewhere in the country.)
These market conditions might not prevail in other parts of the country, but Wal-Mart is not known for making major capital investments on a whim.
Posted by: Dave in L.A. at March 2, 2004 06:45 PMRight now, Wal-Mart seems a fig leaf. Safeway has other, self-inflicted problems and is at least in part, trying to flog the workers for management's recent mistaken acquistions.
All these stores have low labor turnover, and that is a good thing for the customers. I don't want to shop at Wal-Mart, regardless of the price. Wal-Mart makes a big impact in rural towns, but in LA? How are they different in the grocery biz from CostCo, Food4Less or Smart & Final?
Besides, you can't tell me that labor costs make a large difference in an urban grocery running hundreds of thousands of dollars in sales every day. If they all worked for free, it would save about 1% of gross sales. If they are losing money, it's largely a management problem.
Posted by: Kevin Murphy at March 2, 2004 11:05 PMWal Mart should be stopped! I can't stand Wal Mart for its treatment of employees. The other stores wanting to be like them is "SICK". I will never ever return to Vons / Safeway after what Steve Burd started. Americans do not deserve this!
Posted by: Kelly Chacon at March 4, 2004 01:31 PM