Immoral hazard

Photo by Stephen Zenner/SOPA Images/LightRocket via Getty Images

Kroger, the nation's largest grocery store chain, ended hazard pay for its workers on May 17, 2020. The company seems determined not to reinstate any additional pay for frontline employees. It is willing to permanently shutter stores to avoid paying workers, who are putting their lives at risk, a few extra dollars per hour. 

On Tuesday, Kroger announced it would shutter two stores in the Seattle area. The move comes after the city council passed an ordinance requiring large grocery businesses to pay workers an additional $4 per hour during the pandemic. 

The city council was addressing the fact that many large grocery chains, like Kroger, had ended their hazard pay program even as the pandemic intensified. "Our ability to feed our families relies on grocery workers showing up each day. Those who are putting themselves on the front lines every day should be compensated for the work they’re doing,” Councilmember Tammy Morales said. 

Kroger was explicit that its decision to permanently close the stores was in direct response to the Seattle city council's ordinance:

When you factor in the increased costs of operating during COVID-19, coupled with consistent financial losses at these two locations, and this new extra pay mandate, it becomes impossible to operate a financially sustainable business.

The company's claim that it has been struggling financially during the pandemic is belied by its public earnings reports. Through the 3Q of 2020, which ended November 7, Kroger had over $2.9 billion in operating profits. That's an extra $1.2 billion in profits as compared to the same period in 2019.

How is the company spending the extra money? In January, Kroger announced that it would be issuing "a quarterly dividend of 18¢ per share to be paid on March 1, 2021." With about 818 million shares outstanding, the dividend will transfer $147 million to investors. 

Last September, Kroger announced a new $1 billion stock buyback program. Buying company stock reduces the supply in the market, driving up stock prices. That benefits investors and also top executives like CEO Rodney McMullen, who are compensated mostly in stock. In 2019, McMullen received  $21,129,648 in total compensation.

The United Food and Commercial Workers (UFCW), which represents workers at the Seattle stores, blasted Kroger's decision:

Today, Kroger publicly announced the closure of two QFC stores in Seattle, in a transparent attempt to intimidate other local governments from passing ordinances that would provide hazard pay to front line grocery store workers. Essential workers, our local government, and our communities will not be threatened by this corporate bullying.

The COVID pandemic has caused serious illness and taken lives, and at the same time the amount of work and the level of stress and risk for grocery store workers has risen dramatically.

On January 19, the City of Long Beach passed a similar ordinance requiring a $4 per hour pay increase for grocery workers for four months. Kroger responded by shuttering two area stores. 

How Kroger is compensating workers

"We will continue to support you, and your families, during this difficult time," Kroger Senior Vice President Tim Massa said in March 2020. "We care about your physical, your financial, and importantly, your emotional well-being — as we continue to improve our safety measures, and benefits, to support you."

Nearly a year later, Kroger is in a less generous mood. 

According to an internal Kroger memo obtained by Popular Information, the company awarded associates "1,000 fuel points" on February 11. Those points can be redeemed for about $1 off a gallon of gas at participating stations. So the value of the points is around $12 for a fill-up of a typical tank. Associates also received a $100 store credit. 

The company acknowledges in this memo that the pandemic is imposing additional costs on workers but is still unwilling to increase their compensation on an ongoing basis. 

A worker speaks out

Popular Information spoke to a Kroger employee at one of the two stores in Seattle that is closing. The employee requested anonymity because they still work at the store, which is not closing until April. 

The employee, who has worked for Kroger for five years, said the pandemic has made for an intense working environment for the last 11 months — particularly because this worker is in a high-risk group. The decision to shut the stores down over worker pay seems like "a big bully thing," the employee said.  

The employee noted that several workers at the Seattle store had contracted COVID and, in other locations, Kroger workers had died from the virus. Nationwide, "there have been at least 137 grocery worker deaths and over 30,100 grocery workers infected or exposed," according to the UFCW.

Although Kroger has said it will try to place employees at other stores, many workers are "anxious and scared." People "don't know how they are going to be paying rent" because they aren't certain how many hours they will be assigned at a new store. There is also uncertainty about whether alternative stores will be a manageable commute from where they live. 

The employee pointed out that there were serious problems with the "Rewards card" credit and other benefits they've been allocated in lieu of increased pay. The money is not loaded onto a physical card, but is associated with your phone number. So anyone with access to your phone number can spend the money. At least one person had their store credit stolen by a family member.  And the employee doesn't drive, making the "fuel points" worthless. 

A different path

Other grocery chains have taken a different approach. Trader Joe's, for example, responded to the Seattle city council ordinance by "raising pay for all its employees nationwide." The decision by Trader Joe's undercuts the claim that it is impossible to profitably operate a grocery store with the additional pay to compensate workers for their increased risk. The increased pay at Trader Joe's "will continue throughout the pandemic or until employees are 'eligible for vaccines as 'grocery workers.'"

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