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Going through the checkout line

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San Diego Union Tribune

Iggy Ponce De Leon, a 27-year veteran of the grocery industry, has seen the business change dramatically in Southern California since the employee strike three years ago.

Until recently, he said, it was not uncommon to work alongside three generations of a family. The jobs in the grocery business were so good, with top-notch benefits and solid wages, that parents and grandparents would angle to get younger members of their families into the industry as well.

“It used to be hard to get into,” Ponce De Leon said of grocery store jobs. “Now you don’t hear about grandfathers trying to get their grandsons a job in the business.”

Grocery workers and union officials blame the change on the implementation of a “two-tier system,” which was one of the key concessions the United Food and Commercial Workers union made to help end a 41/2-month strike and lockout that ended in 2004.

Under the system, those hired after the labor dispute get lower pay and take longer to qualify for health benefits than before.

For instance, the waiting period for health insurance for most employees increased from four months before the strike to 12 months under the new contract. Courtesy clerks must wait 18 months before they are eligible. It takes 30 months before a grocery worker is eligible for family coverage.

The union said of the more than 40,000 second-tier workers, only 75 have dependent health care coverage.

One result, according to Ponce De Leon and other workers, is that a once-stable work force has become rife with turnover and turmoil.

“Employees come through those doors and then leave right back through them a few months later,” said Ponce De Leon, a cashier at an Albertsons in Spring Valley.

The region’s three major grocery store chains – Albertsons, Vons and Ralphs – are negotiating with the union on a new contract. The current one expires March 5. The two-tier system is a key point of contention in the talks, with the union arguing that turnover created by the system is bad both for workers and for business. Company executives acknowledge that turnover spiked after the strike as longtime workers left for other careers. The three chains said that up to 25 percent of their workers did not return after the strike and lockout. Still, the companies maintain that turnover rates have dipped back down and become more stable.

Larree Renda, executive vice president and chief strategist and administrative officer for Vons parent Safeway, said turnover was almost nonexistent before the strike but it is now on par with stores in other parts of the country.

“It is not the highest. It’s not lowest,” Renda said of turnover in Southern California.

“Like all retail, we have high turnover at the entry level,” such as students working during summer break, added Adena Tessler, spokeswoman for the three grocery chains. “However, because of the quality benefits, leadership training and career opportunities, our overall employee retention is far greater than the overall retail industry.”

Tessler pointed out that more than half of the UFCW workers are veteran workers, predating the most recent contract.

The grocery chains would not provide specific turnover rates at their Southern California stores. According the Bureau of Labor Statistics, turnover in the entire retail sector is about 55 percent annually.

A study by the UC Berkeley Center for Labor Research and Education found that in Los Angeles, a turnover rate of 19 percent climbed to 32 percent after the contract went into effect. Turnover in the first year of employment for grocery workers climbed from 30 percent to 52 percent.

Jack Brown, chairman and CEO of the Colton-based chain Stater Bros., said the increase in turnover was so stark at his chain that his company recently agreed to a new deal with the UFCW that gets rid of the two-tier system.

The company had adopted a two-tier plan when it agreed to abide by the 2004 contract reached by the union and the three major chains. This time, Stater Bros. decided to craft a deal separately from the chains.

While turnover continued to be low after the strike among longtime workers, Brown said, turnover for entry-level employees had doubled, from an annual rate of 25 percent to 50 percent.

Brown said the longer waiting period for pay raises and health benefits for those hired after the strike made it difficult to hire top-notch workers who want to make a career in the grocery business.

“We need to make sure we are attracting the best of the young people,” he said.

The increase in turnover since the strike is hardly surprising, said Ruth Milkman, a sociology professor who directs the Institute of Industrial Relations at the University of California Los Angeles.

“It’s an ironclad law of economics that low wages means higher turnover,” she said.

And high turnover can be costly to the grocery store chains, said Steve Earl, senior industry marketing manager for the retail and grocery industry at Kronos, an employee retention firm.

“Turnover is the Achilles heel of the grocery industry,” he said. “It’s a real problem, with real costs associated with it.”

He estimates it costs grocers about $3,000 to hire and train an employee. Chains are especially concerned about workers who leave after 60 days because by then the company has spent money training them.

“A real pain point is having an employee leave right after they’ve been trained – that’s a real bell ringer,” Earl said.

Longtime workers say that, all too often, that is exactly when new workers leave.

John Reil, 48, a produce manager at a Vons in Encinitas, said he has tried to train two separate workers to be the assistant produce manager but neither was interested.

“With a lot of people that are here now, it’s hard to figure out if they are going to stay,” he said.

Renda of Safeway said that while turnover increases training costs, newer workers have lower salaries and benefits packages.

“What you end up with is a push,” she said. Brown of Stater Bros. said that after three months new hires are required to pay their union dues. Many of the younger ones opt for other jobs, not wanting to pay out the extra cash, he said.

“They figure ‘I can go twirl a sign on the corner and make $10 an hour,’” he said.

It is not just the costs associated with turnover that can hurt grocery chains, Earl said. A revolving door can hurt the chains’ ability to provide top-notch customer service, an increasingly important factor as supermarket chains have moved beyond offering lower prices to attract business.

Brown agreed, saying that his company crafted a deal with the unions because customer service is the cornerstone of their business.

“We believe there is an offset to a little higher pay and getting a better person,” he said.
Patricia Stewart, a frequent shopper at the Vons in University Towne Center, said turnover has noticeably increased since the strike.

“There has been a lot of turnover even in the last four months,” she said, adding that she has not seen a corresponding drop in service.

But not everybody thinks that turnover is such an important issue in the grocery business.

Ted Taft, managing director at Meridian Consulting, which works with the grocery industry, said turnover is a nominal concern.

“I’m not a believer that turnover is a big deal in the grocery industry because there’s not much training there,” he said. “It’s not like you have highly trained people.”

Harley Shaiken, a professor at the University of California Berkeley who specializes in labor issues, said that two-tier systems have other drawbacks aside from turnover.

The fact that employees do the same job for different wages can result in low morale. Other industries, like the airline business, have tried two-tier systems only to revert back to a single pay and benefits package, Shaiken said.

Poor morale, he added, “translates into lower productivity and service and that is not what you want in a competitive business.”

Longtime workers say newer workers are more inclined to call in sick and come in late because the lower pay and lack of benefits make them value the job less.

“They just call in sick and I have less cashiers and my lines are longer and longer,” Ponce De Leon, the Albertsons cashier, said.

For Suzanne Castro, who works at an Albertsons in Oceanside, the real problem with the two-tier system is basic unfairness.

“They’re working the same job but they’ll never make the money we make,” she said. “At times, I look over at them and I feel so guilty.”

But not all new hires find the current system odious.

James Tyron, a Ralphs store stocker hired after the strike, said he had to wait 18 months before he was eligible to sign up for the company’s health insurance coverage.

Fortunately, he remained healthy during the delay. “Nothing came up, but it’s nice to have it now.”

While he doesn’t like the notion of a two-tier pay and benefits system, Tyron said he has fared pretty well under the current contract, getting a raise after less than two years on the job.

But, he acknowledged, “It’s all I know since I’ve been hired.”