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Three Years Later: California Labor Pacts’ Aftermath

Three Years Later: California Labor Pacts’ Aftermath

By David Merrefield
VP, Editorial Director

At the time the protracted strike-lockout finally drew to a conclusion in Southern California nearly three years ago, it was clear that organized labor had lost a big one and that supermarket employers came out on top. The labor strife involved Safeway, Kroger and Albertsons.

The reason organized labor lost has to do mainly with the two-tier compensation approach labor ultimately accepted. Under that system, supermarkets won the right to hire new workers at lesser pay rates than those being earned by long-tenured employes, and to block new hires’ access to the top pay rates commanded by incumbent senior workers. As was pointed out in a Page 1 news feature in last week’s SN, the 2004 contract set the upper earnings limit at $15.10, against $17.90 under the previous contract. Moreover, a far longer period is required for workers to reach the new and lower ceiling.

The trajectory implicit in pay tiers goes like this: Senior workers retire or otherwise depart. They are replaced by lesser-paid workers. In time, the higher-wage tier vanishes altogether. This, of course, is the attraction two-tier systems hold for employers.

What’s remarkable is how rapidly just such an outcome was reached. As the initial two-tier contracts come to their three-year conclusion on March 5, the process of seeding new workers into the lower tier has moved along to the extent that even organized labor now has little incentive to champion the higher tier. One labor observer told SN that “it’s of no great political benefit to negotiate for the older tier, because the union’s constituency has become the second tier.”

If such is the case, then labor peace is most likely in the offing for Southern California, since employers are motivated to seek peace too. After all, the three employers lost some $2 billion in unrealized sales during the strike-lockout that lasted nearly five months, a sum that takes a long time — maybe about three years — to recover.

One irony embedded in the situation is that the labor strife was fomented at a time when traditional supermarket operators had every reason to believe that Wal-Mart Stores would overspread the land with great numbers of supercenters, all of which would be able to underprice supermarkets, owing, in part, to their unorganized labor force, which was paid less than the rates supermarkets were obliged to pay. As it developed, though, Wal-Mart encountered much resistance to its store rollout plans and committed numerous public relations gaffes in Southern California and elsewhere. As a consequence, Wal-Mart now has just over a score of supercenters in the region. It was earlier predicted that twice that many would be established by next year.

In assessing the aftermath of supermarkets’ campaign to lower wage rates, it’s well to view the situation as a classic right vs. right dilemma: Supermarkets clearly should defend turf from interlopers who don’t play by the same rules, but aren’t workers entitled to compensation that moves them into the lower ranks of the middle class if they perform well? Yet should it fall to supermarkets, virtually alone, to provide that greater good?

At the end of the day, then, it’s the absence of a level playing field, which organized labor did little to flatten, that is the true villain.