On May 11, the Anaheim City Council will consider whether to take action on Councilman Jose F. Moreno’s proposal to impose premium pay on Anaheim grocers, retailers and drug stores.
It’s proponents like to call it “hazard pay”: a $3-$5 an hour premium tacked onto employees’ existing wages – which currently average $18 an hour for grocery store employees.
At its April 27 meeting, the United Food and Commercial Workers’ Matt Bell asked the city council to agendize premium pay, calling it the “right thing to do” since these “front-line workers” risked contracting COVID-19 and indeed, a number of them did. Bell, who earns $170,256 as secretary-treasurer of UFCW Local 324, did not request premium pay for other essential workers in industries whose workers are not represented by the UFCW.
The UFCW has been one of the largest donors to Moreno’s council campaigns. The union made the maximum contribution of $1,900 to his 2016 campaign, and maxed out again in 2018 with $2,000.
Councilman Moreno duly obliged Bell’s request, and moved to agendize premium pay for discussion and possible action. Support from two other councilmembers is necessary to agendize an item, which Councilmembers Avelino Valencia and Jordan Brandman supplied.
Wrong Policy At The Wrong Time
Moreno justified his support for premium pay by citing a liberal Brookings Institute study claiming supermarkets have piled up $16 billion in profits. What he didn’t say was this study only examined the top 13 publicly-traded, national grocery store chains. It omitted independent stores and chains, ethnic markets, and mom-and-pop grocers.
Yet Moreno’s proposal would apply to them all.
Furthermore, Moreno’s reason is symptomatic of the simplistic progressive view of profits as akin to Scrooge McDuck’s vault:
To Moreno’s thinking, the targets of his premium pay ordinance can simply reach into their giants vaults of profit – no harm done.
Moreno argument betrays a lack of economic understanding. His premium pay ordinance would significantly increase the operating costs of affected store locations in Anaheim (and supermarkets, especially, are thin-margin businesses). Corporate headquarters doesn’t respond by saying, “Well, that’s OK if those locations lose profitability or operate at a loss. We can make it up with the profits of other locations.” That’s not how business works. Store locations sink or swim on their own merits. Chronically unprofitable locations turn their situation around or risk closure. Moreno’s premium pay proposal increases the likelihood of closure – with the attendant loss in jobs and convenient access to groceries.
This isn’t an idle possibility. After the Long Beach City Council passed a $4 per hour premium pay ordinance in December 2020, Kroger announced the closure of two of its Long Beach stores (a Ralph’s and a Food 4 Less). Kroger closed three stores in Los Angeles after that city council imposed premium pay. No doubt those who worked at those stores – and the residents who relied on them – appreciated their council representatives making life harder for them while solving nothing.
Keep in mind that was the reaction from the largest supermarket chain in the country. Moreno’s premium pay ordinance would fall much more heavily on smaller chains like Anaheim’s own Northgate Gonzalez Market, and independent grocers and retailers.
One of a supermarket’s biggest operating costs is labor – and a premium pay ordinance will boost labor costs by 25% to 30%. That’s a huge increase, and it has to come from somewhere. Locations already teetering on the brink will close. Once a supermarket location closes, don’t count on it coming back – as residents of neighborhoods near the Rio Vista shopping center can attest.
Others will cut employee hours, or pass the cost on to shoppers in the form of higher prices.
We are already seeing a significant rise in food prices. According to a recent study by Capitol Matrix Consulting, premium pay mandates will force the typical family of four to spend an additional $400 annually on food and household supplies. Families that can do their grocery shopping in Orange, Garden Grove, Fullerton will take their business – and sales tax revenue – there.
How is does forcing poor and working families who are struggling to make ends meet, to further stretch their household budgets serve the cause of justice and equity?
Patrons also have the option of shopping online – especially retail and drug store customers – and bypassing higher prices at Anaheim locations that way.
Anaheim businesses have spent the last year struggling to stay alive while complying with state government lockdown directives that are variously draconian, arbitrary and contrary to common sense. They are just beginning to find their footing and emerge from this government-imposed nightmare.
COVID-19 case rates are bottoming out. The Newsom Admninistration is preparing to lift pandemic restrictions next month. Businesses – including supermarkets, retailers and drug stores – long ago learned how to provide their employees with safe working conditions amidst the pandemic. Indeed, a recent study by a University of Chicago economist for the National Bureau for Economic Research found that – contrary to the contentions of premium pay proponents – workers were far less likely to contract COVID at work than at home.
Premium Pay Will Exacerbate Anaheim’s Food Desert
Many parts of Anaheim – especially West Anaheim – have fewer supermarkets than it in the past. A premium pay ordinance increases the likelihood that existing stores will close. Good luck bringing Trader Joe’s or any other higher-end grocer to West Anaheim if the council approves this hare-brained idea.
One solution to food deserts is smaller independent and ethnic grocers. Moreno plumps for an official Little Arabia designation, but advocates policies like premium pay that would severely increase operating costs for Little Arabia markets and retailers.
Moreno often tries to soften his left-wing ideology by offering rhetorical support for small businesses. His sponsorship of premium pay is another example that when the rubber meets the road, the rhetoric gives way to anti-business reality. Last year, for example, he urged support for Proposition 15 – a huge increase in commercial property taxes that would have led to crippling rent increases for small business tenants.
Supermarkets Have Already Stepped Up
Moreno’s proposal also ignores the reality that the businesses he is targeting have already stepped up. For example, grocers have been providing extra pay and benefits, including:
- Boosting pay by $2-$3 an hour
- Spot bonuses
- Free groceries, gas and other necessities
- More paid time off and extra sick leave
- Benefits that cover COVID testing, treatment and care
This is partly driven by good corporate policy, and also by economic necessity. Employers are desperate for workers and are already paying a premium in terms of compensation. What Moreno’s proposal does is ham-handedly drive the cost of labor beyond what an already heated labor market can bear.
Moreno’s Proposal Is Discriminatory and Arbitrary
Moreno is targeting three types of businesses – grocers, retailers and drug stores – with a mandate to increase their hourly wages.
Which retailers? Moreno doesn’t say. Will that be determined by size? Employee count? Types of products sold? Will it include TJ Maxx or other apparel stores? Automobile supply stores? Hobby shops?
Why exclude, say, fast food workers? Are they less at risk of contracting COVID than someone taking deliveries at the loading dock?
Moreno has railed at using TOT rebates to incentivize 4-Diamond hotel construction as “picking winners and losers.” Yet that is literally what he is doing here.
A premium pay ordinance also puts Anaheim at risk of litigation. There is the very real question of whether it is legal for a city to single out specific businesses or types of businesses and dictate their wage levels. The California Grocers Association has sued the City of Long Beach over its premium pay ordinance. According to sources, Long Beach could end up on the hook for re-paying the premium pay it forced on grocers.
Councilman Moreno’s premium pay is a attempt by the UCFW to exploit the COVID-19 pandemic to use the power of government to extract by force what it couldn’t secure at the bargaining table. It is also a classic exercise in wishful thinking: there is no such thing as a free lunch. Everything comes with a price, and in this case it is store closures, reduced hours to workers, and higher food prices that hurt poor and working families the most.
Councilmen Valencia and Brandman agreed to agendize this proposal for the purpose of discussion. Let’s hope they understand how counter-productive this proposal from Moreno and the UFCW will be for Anaheim residents and businesses, and vote it down.