[Marxism] 2-Tier Plan Crucial Win for the Grocery Chains

Yoshie Furuhashi furuhashi.1 at osu.edu
Sat Feb 28 10:39:04 MST 2004

*****   February 28, 2004
2-Tier Plan Is Crucial to Grocery Pact
By Nancy Cleeland and James F. Peltz, Times Staff Writers

For 139 days, tens of thousands of California grocery workers walked 
the picket lines, trying to stave off cuts to their health and 
pension benefits. But in many ways, those who stand to lose the most 
are people who haven't even been hired yet.

The tentative contract reached late Thursday, which would end the 
supermarket strike and lockout, would create two classes of employees 
at Albertsons, Ralphs, Pavilions, Vons and other stores covered by 
the accord in Central and Southern California.

Those newly hired under the "two-tier" setup would earn less per 
hour, be eligible for fewer holidays and receive more meager health 
and pension benefits than veterans, people familiar with the matter 
confirmed Friday.

Securing a two-tier plan was a crucial win for the grocery chains 
involved in the dispute, the longest-running in U.S. supermarket 
history. The stores insisted on the plan to significantly cut their 
labor costs to better compete with nonunion, lower-cost grocery 
retailers such as Wal-Mart Stores Inc.

The United Food and Commercial Workers union initially fought against 
a two-tier program, arguing that it would lead to discrimination 
against longtime employees and put a financial strain on the fund 
that covers their health benefits. That's because the new hires - who 
are likely to be relatively young and healthy - would be placed in a 
separate healthcare pool from veteran workers.

In the end, though, the union had little choice but to accept the 
two-tier arrangement to help bring an end to a clash in which many of 
its members were already suffering great hardship, people close to 
the talks said.

As tens of thousands of UFCW members prepared to vote over the 
weekend on the contract, their moods ran from relieved to angry.

The rank and file haven't seen the document they will be asked to 
ratify - they will receive copies when they go to union polling 
places Saturday and Sunday - but some are worried that the terms will 
be unacceptably inferior to those in the contract that expired Oct. 6.

"I'll vote for it if it is better than what we have. To me, this is 
common sense," said Rickie Williams, a 43-year-old customer service 
clerk walking the picket line in an Albertsons parking lot in Santa 
Monica. "Why stay out for almost five months and then vote yes on a 
contract that isn't as good as the one we have?"

But one of his fellow pickets, Diane Landau, said she would follow 
the union's guidance and vote in favor of the pact.

"I will accept the contract," said Landau, 47, a courtesy clerk. "I 
know the union fought the good fight for us."

Details of the deal reached Thursday haven't been made public. But 
sources close to the negotiations said the two-tier terms weren't 
radically different from those put on the table by the supermarkets 
in early December.

Under that proposal, the gap between the two groups was significant: 
Top scale for a newly hired cashier, for example, would have been 
$15.10 an hour, compared with $17.90 for a veteran - a 16% 
difference. What's more, it would have taken a new cashier about six 
years to reach the top; it used to take two years to do that.

When it came to healthcare benefits, the early December proposal had 
the supermarkets capping their contribution for the first tier at 
$4.60 an hour per employee, while the contribution for the second 
tier would have been only $1.35 an hour per employee.

Two-tier contracts had widespread appeal in the 1980s, when 
deregulation and globalization began to squeeze large, established 
companies. They demanded concessions from unions, and unions found 
cuts easier to swallow if members already on the payroll were spared 
the brunt of them.

But most two-tier plans didn't last.

In 1985, for example, two years after American Airlines pioneered the 
dual structure in its contract with pilots, the union threatened to 
strike, saying the 50% wage gap between old hands and newcomers 
created conflict. The gap was narrowed through subsequent contracts 
and eliminated within a decade.

"There was a revolt from junior seniority members saying, 'Enough of 
this. Why should we be paid less?' " said Capt. Steve Blankenship, 
chairman of the national communications committee for the Allied 
Pilots Assn., the union for American's pilots. "A two-tier contract 
is divisive in its initial construct and, as it goes on, it sabotages 
morale. I would not recommend it."

For their part, the supermarkets have defied the trend of moving away 
from two-tier agreements. The three parent companies in the dispute - 
Albertsons Inc., Kroger Co. and Safeway Inc. - have two-tier 
contracts in place around the country, several with the UFCW. And 
they were especially determined to put the system in place in 
Southern California, where grocery workers have been among the 
best-paid in the country.

What's more, this contract will set the stage for contract talks 
across the nation: Between now and mid-October, Safeway will be 
negotiating five contracts, including one in Northern California, 
while Kroger faces nine.

On Friday, some UFCW veterans expressed dismay at the situation. They 
said a two-tier system would paint targets on their backs: Why would 
a manager, with his or her bonus tied to saving money, offer 
first-tier employees the chance to earn premium pay by working 
Sundays and holidays when bringing in a second-tier worker would cost 
so much less?

"I'll get my regular pay," said Rick Hernandez, a 29-year-old meat 
clerk from Venice, "but they might cut my hours because that would be 
the cheaper way to go." . . .

The UFCW and the supermarkets have estimated that about one-third of 
the people covered by the contract would be in the lower tier by the 
time the agreement expired in three years. Within a decade or two, if 
the two-tier clause wasn't renegotiated, everyone working for the 
three chains would be in the bottom tier.

"The two-tier system, especially in Southern California, has a lot of 
savings attached to it, and it only grows over time," said Andrew 
Wolf, an industry analyst at the investment firm BB&T Capital Markets 
in Richmond, Va.

Peter Cappelli, a management professor at the University of 
Pennsylvania's Wharton School, said that when such deals were signed 
in the 1980s, negotiators came off as "politically astute, because 
the people voting on the contract would never experience the lower 
tier. But once you got enough of these folks into the workplace, and 
particularly into the union, the deals couldn't be sustained."

Two-tier plans aren't always ideal from the employer's perspective, 
either, said Charles Cerankosky, a financial analyst at McDonald 
Investments. That's because an added wage scale complicates contracts 
already loaded with a jangle of job classifications and seniority 

But in the ultra-competitive grocery business, it's often difficult 
to see any other way to compete with nonunion rivals, from big-box 
discounters to dollar stores.

"The union has to ameliorate existing workers' desire for increased 
compensation, so you try to put more of the burden on people who 
aren't yet hired," said Cerankosky, whose firm in the past has 
advised Safeway. "In the abstract, it's real simple - it's the 
details that get complicated."

Before the last contract expired, the average UFCW member in Central 
and Southern California put in 32 hours a week and earned $13 an 
hour, according to people close to the union, for an annual income of 
$21,632. Some veterans with full-time jobs earned more than $40,000 a 
year. All workers were enrolled in company-paid health plans.

Under the proposed contract, sources familiar with it said, veterans 
wouldn't receive wage hikes, although they would receive two lump-sum 
payments based on their length of service. They also wouldn't have to 
pay much, if anything, for healthcare coverage for at least the first 
two years of the contract, the sources said. Payments might be 
required in the third year, however.

For Vons worker Jeannie McGrew, the fact that new hires are going to 
get so much less isn't good news. But it seems inevitable.

"I don't know what the pay difference is going to be" between the two 
tiers, she said. "I'm assuming it's going to be pretty bad. But I'm 
probably going to vote yes. I don't think any of us believes that by 
holding out longer we'll get something better."


Times staff writer Ronald D. White contributed to this report.


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