"Hero pay" forces store closures in California

A number of cities in California are currently in the process of learning a lesson about how the best of intentions can often end up invoking the law of unintended consequences. The Long Beach City Council approved a measure on January 19th that identified certain grocery store workers as “front line” employees during the pandemic and ordered their employers to give them all a four dollar per hour raise for the next four months. The provision would allow for the pay raises to be extended if the plague wasn’t under control by then.

The council labeled the raises as “hero pay.” That seems like a nice gesture doesn’t it? Those are mostly jobs that pay the minimum wage or something close to it. But what the City Council apparently didn’t anticipate was that the qualifying grocery chains were going to see that as the straw that broke the camel’s back. Kroger announced this week that two of its stores in Long Beach would be closing permanently. Their reasons for doing so should have been obvious before this new mandate was issued. (Yahoo News)

Kroger Co. will close two Southern California supermarkets in response to a local ordinance requiring extra pay for certain grocery employees working during the pandemic.

The decision announced by the company Monday follows a unanimous vote last month by the Long Beach City Council mandating a 120-day increase of $4 an hour for employees of supermarkets with at least 300 employees nationwide and more than 15 in Long Beach.

Kroger said it will close a Ralphs market and a Food 4 Less on April 17, the Press-Telegram reported.

It’s not just Long Beach where this is happening. A nearly identical ordinance was passed in the city of Montebello. Last week, Santa Clara County passed a mandate for a five-dollar per hour raise for a variety of essential workers, including grocery clerks. Similar resolutions have been drafted and will likely come up for a vote in Los Angeles, Pomona, Oakland, and San Jose.

Grocery stores have been considered essential business since the start of the pandemic for obvious reasons. People still have to eat. And it’s easy to be sympathetic to the people working in them who have to deal with the public milling in and out of the aisles every day with the virus lurking around every corner.

But none of those facts do anything to mitigate the realities of operating a business. The City Council signed an order mandating a massive increase in the cost of doing business without addressing the question of where the money was going to come from. One analyst estimated that Kroger would have to swallow a 28% increase in labor costs overnight while operating on a much smaller profit margin. That would literally send those stores on the way to unprofitable status and potentially bankruptcy.

Further, the city’s order didn’t apply to everyone with jobs at essential businesses. It didn’t even apply evenly to all grocery clerks. It only impacted the ones with more than 15 workers locally and 300 across the nation. The selective nature of the penalty flies in the face of labor laws and undermines the entire collective bargaining process that liberals love to talk about so much.

The only other option that Kroger would have had available would have been a massive price hike on groceries at a time when a lot of people are already struggling to feed themselves. But since the mandate didn’t apply to smaller grocery stores, their prices can remain the same and Kroger’s customers would likely have flocked to the competition. That would have shut them down eventually anyway.

So now, instead of helping out some minimum wage workers with a temporary pay boost, hundreds of jobs are being eliminated permanently. Authoritarian mandates during a declared period of emergency strike again… and backfire entirely.

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David Strom 5:21 PM on March 31, 2023