Kroger announced Wednesday that three more grocery stores would be closing in the LA-area in the next few months due to the city’s recent “hero pay” ordinance.
Under the Los Angeles “hero pay” ordinance passed earlier this month by the LA City Council, grocery store workers will, by law, receive an extra $5 an hour due to increased risks and workloads as a result of the COVID-19 pandemic. Grocery, pharmacy, and some retail workers are covered under the ordinance, which will last 120 days until expiring in early July.
The Long Beach “hero pay” ordinance caused a strain on many grocery stores, with 2, both owned by Kroger, being forced to close due to the higher costs making the stores not viable anymore. L.A. officials said that that would not happen under their ordinance. However, two Ralphs and a Food 4 Less, all owned by Kroger, were announced to close sometime in May. While all three had been struggling for some time and had been planned to close at some point after the pandemic to continue access of food in their respective areas, the extra $5 per hour per employee added another $20 million in operating costs across the board for Kroger in LA, forcing their hand to close underperforming stores.
“The mandate will add an additional $20 million in operating costs over the next 120 days, making it financially unsustainable to continue operating underperforming locations,” said Kroger in a press release. “The Los Angeles City Council disregarded their own Economic Impact Report by not considering that grocery stores – even in a pandemic – operate on razor-thin profit margins in a very competitive landscape.”
In another statement later on Wednesday, Kroger emphasized the strain that grocery stores have been under since the beginning of the pandemic:
“It’s never our desire to close a store, but when you factor in the increased costs of operating during COVID-19, consistent financial losses at these three locations, and an extra pay mandate that will cost nearly $20 million over the next 120 days, it becomes impossible to operate these three stores,” said the Cincinnati-based supermarket company.
Unions were quick to comment shortly after Kroger’s announcement on Wednesday, decrying the companies decision to close stores while also defending “hero pay”, which they referred to as hazard pay.
“Essential workers in grocery stores are putting their health at risk every day to make sure families can put food on the table and city leaders are stepping up to ensure they have the hazard pay they have earned,” said the United Food and Commercial Workers International Union in a statement on Wednesday. “Hazard pay is not just about recognizing the health risks grocery workers face, it’s about making sure that these essential workers have the support they need to keep our grocery stores safe for customers and ensure all our families have the food we need as the pandemic continues.
“They’re threatening the food supply for communities hit hard by the region’s more than 130 COVID-19 grocery store outbreaks and destroying the jobs of hundreds of essential grocery workers.”
Grocery store, commerce organizations denounce LA “hero pay” ordinance
However, many grocery store and commerce organizations were quick to defend the decision as well, pointing out that grocery stores are very sensitive to sudden financial changes to stores and that the city councils are forcing them to pay more than they can afford, as well as pointing out the hypocrisy of their actions.
“The pay bump was the wrong decision,” said the Valley Industry & Commerce Association in a Wednesday statement. “It is wrong and hypocritical for the City to expect these suffocating provisions from businesses when they are not themselves providing ‘Hazard Pay’ to the countless City employees that are keeping our city running. The future is bleak for Los Angeles. If the City Council continues to insert itself in business affairs, disregarding community concerns, expert warnings, and concrete evidence, businesses will not want to invest in Los Angeles.”
Experts noted that they had warned other cities that this would happen to them due to the strong effect the pay bump had on store closures in Long Beach.
“I told the Globe last month that this would happen in Los Angeles,” Southern California adaptive reuse consultant Henry Grigoryan told the Globe. “Of course it would happen. The ordinance is costing each store thousands more per day. The LA City Council passed it 14-1, with many citing ‘moral reason’s for voting yes. They didn’t look at the financial realities of it for companies. They didn’t look at the food deserts this would cause. They didn’t think of the dozens of people now going to be out of work at each location. The council was playing chicken with Kroger on this, as they expected them to flinch and not do this. Kroger just wasn’t playing a game and was just looking at the grim figures it caused. I don’t know what else to say.”
The three stores in LA are expected to close by mid-May. Other closures by different companies are possible in the coming weeks as the first paychecks with the new pay bump are due to go out soon.