Unions bite the hand that feeds them and us

Last week, Joe Biden’s vice presidential pick California Sen. Kamala Harris joined with United Food and Commercial Workers International Union (UFCW) President Marc Perrone to attack grocery retail stores across the country, demanding they reinstate hazard pay for all employees on the frontline – with no regard to the significant economic ramifications that come with such a sweeping financial commitment.

Some brief background is in order to fully understand the unjust nature of these unrealistic demands. In late March, as the scope of the COVID-19 pandemic in the U.S. became alarmingly clear, many major U.S. retailers announced temporary pay bonuses for their frontline employees. They are now learning that no good deed goes unpunished.

These temporary raises — which often boosted the earnings of entry-level workers by more than 10 percent — helped alleviate financial stress for millions of retail employees during an uncertain time and rewarded their efforts at a time when many Americans were hunkering down in their homes. But, as the economy began to rebound in May and many states began reopening, companies that phased out these measures — which were never intended to be permanent – were accused of “unconscionable” behavior.

Consider Kroger, for example, the largest grocery chain in America. In early April, the company implemented a temporary $2 per hour wage increase for its frontline employees, as well as additional emergency paid leave.

It is worth noting that Kroger, a legacy union company, current offers its employees one of the best compensation packages in the industry, including health insurance, a competitive retirement plan, and tuition assistance. The company has been a leader in providing free COVID-19 testing to its employees and, like many other retailers, moved quickly to implement increased cleaning protocols, install protective barriers, and institute face covering requirements to protect its workforce and customers.

Despite this, Harris and Perrone alleged these CEOs have failed to “support the hardworking men and women who are keeping their businesses afloat,” claiming “those who lead America’s grocery companies must take concrete and immediate steps to keep their workers safe and fairly compensate them for the serious health hazards they face.” This entirely disregards the more than $800 million Kroger invested rewarding associates and implementing industry-leading measures to safeguard the health and safety of associates and customers.

Further, when Kroger ended its “Hero Pay” program in mid-May, even its decision to issue up to $400 in one-time “Thank You Pay” to its associates did not satisfy the UFCW, whose members represent much of the company’s workforce. Instead, the union accused the company of abandoning its employees with the pandemic still raging, and demanded the $2 wage increase be made permanent.

Yet, despite claiming to care about the financial security of its members, the UFCW — seemingly oblivious of its own hypocrisy — did not reduce its union dues at any point during the pandemic, which can total $900 a year per member, in some chapters.

The union’s logic, which seems rooted in the misguided idea that companies could easily finance a permanent pay raise by curbing its profits, doesn’t stand up to scrutiny. Supermarkets around the country saw a sharp increase in revenue in early spring as COVID-19 fears fueled consumer demand; Kroger saw its sales increase by nearly 20 percent in the first quarter of 2020, critical extra revenue that helped the company cover its “Hero Pay” program and hire 100,000 new associates. But as demand returns to pre-COVID levels and a sense of normalcy has begun to return in many states, grocery sales have begun to normalize.

So how would the wage boost really be paid for? Largely by increasing prices for consumers.

Researchers have estimated that a 10 percent increase in the minimum wage, for example, results in a 4 percent rise in food prices. And since higher food prices hit the poor hardest, the effect would disproportionately be felt by low-income families.

To mitigate the effects of rising labor costs, retailers would look for ways to shrink their workforce, making it harder for the millions of unemployed Americans to find work. Automation, which companies already are aggressively pursuing with plans to build several new robotics-driven warehouses, would look like an even more attractive option. Additionally, associates could face a cut to hours worked, or even a decrease in benefits in the long-term to free up funds to account for increased wages across the board.

Acquiescing to the UFCW’s demands would only accelerate these trends, shrinking opportunities for workers, undercutting critical benefits, and raising prices for shoppers when they can least afford it. Unsurprisingly, economists have long understood that “the ability of labor unions to raise wages above competitive levels has a net negative impact on society.”

This is a dangerous trend – of powerful labor unions and activist groups pushing for temporary employee assistance programs to be made permanent, ignores the negative consequences of their short-sighted demands. Companies should not be punished for having acted quickly to help their vulnerable workers cope with the pandemic. They will think twice about doing so in the future.

Steve Pociask is president and CEO of the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.