Mandated "hero pay" will add up to about $0 an hour for some grocery store workers in Los Angeles. Grocers there are closing three stores in response to newly enacted legislation that requires them to pay their workers an additional $5 an hour during the pandemic.
"It's never our desire to close a store, but when you factor in the increased costs of operating during COVID-19, consistent financial losses at these three locations, and an extra pay mandate that will cost nearly $20 million over the next 120 days, it becomes impossible to operate these three stores," said grocery store chain Kroger in a statement given to CBS Los Angeles, announcing that two Ralphs-branded stores and one Food 4 Less location, would be shutting down.
The closures come after the Los Angeles County Board of Supervisors passed its COVID hero pay ordinance in late February. A near-identical $5-per-hour hero pay law was passed by the Los Angeles City Council in early March.
Grocers with over 300 employees nationwide, or which are publicly traded companies, and with at least 10 employees per store, are now required by the county to give their workers additional hazard pay for the next 120 days. The law only applies to stores that are at least 85,000 square feet and for whom food or drug retail makes up about 10 percent of their sales.
These hazard pay laws have swept the West Coast over the past several months, followed closely by the announcement of store closures and lawsuits from grocers.
Long Beach, California, was the first community to pass a $4 hero pay mandate in late January. There too, Kroger announced that it would be closing two other stores that the company says were already underperforming and which couldn't sustain the new pay hikes.
The company also said it would be shutting down three underperforming stores in Seattle, Washington, in response to that city's hazard pay law.
Berkeley, Oakland, and San Francisco, California, have all also passed their own hazard pay laws requiring employers of typically larger grocery stores to pay either an additional $4 or $5 an hour during the pandemic.
The California Grocers Association (CGA) and the Northwest Grocery Association in Washington have sued individual cities over hazard pay laws in federal court, arguing that they violate the National Labor Relations Act and the Equal Protection Clause of the 14th Amendment.
In late February, a U.S. District Court judge in Los Angeles denied the CGA's request for a preliminary injunction against Long Beach's hazard pay ordinance.
In addition to their legal arguments, grocers have been making a practical case against hero pay laws, arguing that they foist significant costs onto employers who will make them up through price hikes, layoffs, cuts to employees' hours, and/or store closures.
"The fallout from the misguided extra pay ordinances is enormous and politicians are to blame," said Ruben Guerra of the Latin Business Association in a Wednesday-issued press release. "Workers will lose jobs, and communities of color will be left with fewer grocery options and more food insecurity. Consumers in other areas where grocery stores are able to stay afloat will pay higher grocery bills."
Proponents of these hazard pay laws counter by arguing that grocery store workers have faced increased risks during the pandemic, for which they are owed additional compensation.
"Frontline grocery retail and drug retail workers are among the heroes of the pandemic, putting their lives on the—often for low wages and minimal benefits—to maintain the food supply and distribution system," reads the text of Los Angeles County's hazard pay law. "Despite their importance to our communities, their employers have not all provided sufficient wages…to compensate frontline employees for their critical function to our society and the significant risk they face."
The text of San Francisco's hazard pay law says the workers need the mandated wage premiums to cover child care costs while the city's schools are closed.
Supporters of hazard pay have argued that grocery stores' record profits during the pandemic make wage premiums easily affordable, and that store closures are nothing more than cynical politics.
Profits for some grocery chains increased by as much as 100 percent during the height of the pandemic when restaurants were closed and everyone was stocking up on groceries.
The Washington branch of the United Food and Commercial Workers International Union (UFCW)—which represents grocery store workers and has been a driving force behind hero pay laws—called the store closures in Seattle "a transparent attempt to intimidate other local governments," noting how profits for grocery store companies had "soared."
"They absolutely can afford this increase," Los Angeles City Councilmember Paul Koretz said in February about grocery store companies when discussing that city's hazard pay proposal, reports the Los Angeles Times. "They absolutely should be paying this increase. And if they shut down stores, it's just out of spite."
Grocers counter that while their profits did go up, those increases came on top of the very slim one or two percent margins supermarkets typically earn.
A CGA-sponsored analysis of hazard pay mandates found that at $5 an hour, these laws would increase the average grocery store's labor costs by nearly 30 percent, and their overall costs by about 5 percent. That's about twice the profit margins most grocery store chains were making during the height of the pandemic. The same report says that those record profits are already starting to recede.
A report by Los Angeles city staff noted that the likely economic impacts of that city's hazard pay law would be some mix of higher wages for some workers, higher prices for consumers, and the potential for companies to either close stores or delay openings, renovations, and promotions.
The debate about hazard pay laws is a very compressed version of the debate about minimum wage laws. Proponents focus on the fact that a lot of workers will get a pay increase, while detractors note the potential for higher disemployment (meaning job losses but also hours cuts and reduced hiring) and higher prices.
Unlike the minimum wage, however, the costs of hazard pay laws are obvious, immediate, and visible for everyone to see.