Market Strike--a Turning Point?

Several large, profitable Southern California supermarket chains are entering the third week of an increasingly bitter strike-lockout as they attempt to lower their labor costs by gaining dramatic changes in work rules and creating new, lower-paid job classifications.

In the propaganda war that has accompanied the walkout, spokesmen for the supermarket chains argue that they need to modify labor practices to stay successful in the increasingly competitive retail grocery industry, and the striking unions accuse the stores of attempting to exploit a hostile environment for organized labor.

Regardless of the merits of the argument, the dispute reflects changing practices in the grocery business throughout the nation and could mark a turning point in the Southern California supermarket industry, according to Daniel Mitchell, director of the UCLA Institute of Industrial Relations.

“You’re seeing an intent (by the employers) to change the relationship (with the unions) and the balance of power,” he said. “It’s not business-as-usual.”

Joe McLaughlin, president of the Food Employers Council, the organization that negotiates for the chains, acknowledged that the stores face no immediate financial crisis, in contrast to auto and steel firms and other companies in smokestack industries that have demanded concessions from their employees.

“It isn’t poverty” that is motivating the employers’ demands, McLaughlin said.

Chains Lament Low Profit Margins

Last year, every chain that is involved in the strike-lockout earned a profit. Vons had a profit of $23.6 million, Safeway $185 million, Ralphs $43.9 million, Lucky $94.6 million, Albertson’s $79.7 million. Alpha Beta’s parent company, American Stores, had profits of $185.5 million. Hughes is privately held and does not publicly report its income, but industry sources say the company is profitable.

Still, the chains lament the fact that the profit margin (net income after taxes as a percent of total sales) in the nation’s $265-billion grocery business is among the lowest of the nation’s industries: 1.15% in the last fiscal year.

Union spokesman quickly counter that supermarket chains’ return on their net worth was 14.88% last year, up from 13.65% a year earlier.

McLaughlin also said the retail grocery business has become more competitive in recent years because non-union discount stores and drugstores with lower labor costs are offering more products traditionally sold only by supermarkets.

“In business today we can’t be complacent,” McLaughlin said. “That’s really what’s behind this,” he said referring to the chains’ demands for relief from “restrictive work rules that serve as a horse collar on the employers.” He said the rules--including limitations on the subcontracting of jobs and the use of part-time employees--prevent the companies from operating efficiently or being able to fully utilize new technology.

Jerry Menapace, director of the retailing department of the United Food & Commercial Workers, which represents 10,000 meat cutters and meat wrappers, said, however, that the supermarkets have been competing for years with stores like Gemco and Long’s Drugs, which pay lower wages, and have stayed profitable.

“These employers know what’s happening in other parts of the country and they’re patterning their demands after what happened in other parts of the country--largely in the Midwest, where we were solidly organized and where the economies went to hell,” Menapace said. In the so-called Rust Belt, the Food & Commercial Workers did make concessions to several chains, including huge Cincinnati-based Kroger Co., in an attempt to save jobs.

Loosening of Work Rules

“There was some merit to employer arguments there,” Menapace said. “That just isn’t true here.”

“Greed is the underlying cause of this strike,” said Jerry Vercruse, chief negotiator for the Teamsters Union, which represents 12,000 drivers, warehouse personnel and office workers.

Most of the major issues in the strike involve work rules that management wants to eliminate or greatly loosen in order to gain greater flexibility in using personnel and facilities.

For example, the chains want to be able to move into new warehouses without automatically granting the Teamsters recognition at the new sites. Management also wants to be able to subcontract work now done by Teamsters to companies that pay lower non-union wages.

The upshot of both of these changes, according to the union, is that over a period of time, the companies could run a greater portion of their operations with lower-paid non-union workers. In the long run, thousands of workers now represented by the union could be replaced, the union maintains.

Vercruse said these demands are indicative of what he calls management’s attempts to erode 40 years of gains by employees.

Work rules also are the centerpiece of management demands to the 10,000 striking meat cutters and meat wrappers. The markets want to cut the guaranteed workday of some workers from eight to four hours and to reduce the number of hours a day they are required to have a journeyman meat cutter on duty.

Just before the strike began, Gerald McTeague, chief negotiator for the meat cutters, referred to the so-called “journeyman on duty” requirement as “sacred.” But, in fact, the union has been fighting a rear-guard action on that front for some time.

Until 1982, the contract called for a journeyman to be on duty whenever fresh meat was sold. That year, the union agreed to eliminate the requirement from 10 p.m. to 6 a.m.

Management entered negotiations this year seeking to eliminate the requirement entirely but is reported to have told the union that it would settle for less--perhaps a rule that would call for a journeyman to be on duty from 9 a.m. to 7 p.m.

Part of the reason for management’s demand is the increasing use of what is known as “boxed beef.” Many stores now receive meat that has already been cut and placed into boxes, rather than getting full sides of beef to be butchered on the site. This has reduced the amount of work available for meat cutters at the stores.

Dan Swinton, a spokesman for the meat cutters, said the union offered to make some compromises on the issue but said the compromises would have to be accompanied by firm guarantees that no currently employed meat cutters would be adversely affected by the changes. He said bargaining on this issue last week foundered on the question of those guarantees. Management said the union reneged on an earlier compromise.

Everyone agrees that market representatives think they are in a stronger position than in 1973, when the meat cutters and the Teamsters waged their last major strike against the Southern California chains. Then, after five weeks on the bricks, the two unions won wage hikes and other contract improvements.

“We weren’t as sophisticated then,” said Bob Voigt of the Food Employers Council.

Vercruse also acknowledged that the relative power of labor and management appears to have changed since that time.

“We were fighting for improvements we needed to have then,” he said. “Now we’re just fighting to hang on to what we have.”

The unions face a difficult task here, as they have faced in other parts of the country in the supermarket industry.

For example, so far this year, 66 supermarket contracts have been negotiated and 42% of those contracts call for two-tier wage scales, according to the Bureau of National Affairs, a Washington research firm. Under such contracts, newly hired workers will be paid less than veteran employees doing comparable jobs for a long period of time. In some instances, the salaries of the new employees will never equal those of the older workers.

The two-tier issue is present in the Southern California strike as well. Management wants to introduce a new lower-paid classification of worker called “meat clerk” who would perform 70% of the tasks now done by a meat cutter. Meat clerks would be paid $7.25 an hour, compared to the $11.60 an hour made by meat wrappers and the $13.48 an hour made by meat cutters.

New Employee Wages

Additionally, management wants to create a new salary schedule for newly hired employees covered by the Teamsters contract. For example, warehouse personnel would receive $10.20 an hour compared to the $13.85 made by incumbent employees. Drivers would receive $12.25 an hour compared to $15.25 an hour now. Office workers would be paid $3 to $5 an hour less than the current average salary of $11.46 an hour, depending on the job classification.

David Willauer, a spokesman for the Food Employers Council, said management needs the new salary schedules to make expansion feasible. Both unions maintain, however, that it is unfair to have two people doing the same work with one being paid less money.

They say that such contracts ultimately create divisiveness in the workplace and are detrimental to the company as well as to the union.

Nonetheless, both unions have accepted two-tier contracts in other areas. For example, the Teamsters accepted a two-tier pact after long negotiations with the Food Employers Council in Northern California last summer. It includes lower wage scales and less attractive fringe benefits for new employees.

Chuck Mack, president of Teamsters Joint Council 7 in Oakland, said he reluctantly recommended the contract to his 2,000 members because he thought they could not wage a successful strike against Safeway and Lucky, the two dominant chains in that region. The members rejected the contract three times before barely ratifying it on the fourth vote.

Only 35.5% of the members voted in favor, but under the Teamster constitution a contract endorsed by the union negotiating committee can be rejected only by at least a two-thirds vote. The validity of the fourth election is now being challenged in federal court.

Mack said he thinks the Teamsters involved in the current strike, in contrast with his union, had decided to strike because they perceived in the employer demands a greater threat. “There’s a very, very serious threat to the Teamster bargaining unit and the collective bargaining agreement in Southern California,” he said.