The Food Retail Boom: Growing Industry, Declining Wages

In California, the food retail industry is growing faster than the general economy. Despite this growth, food retail workers’ wages and working conditions are eroding. A new report by  Saru Jayaraman and the Berkeley Labor Center, Shelved: How Wages and Working Conditions for California’s Food Retail Workers Have Declined as the Industry has Thrived, shows that, while the food retail sector is thriving, its workers are experiencing increasing levels of poverty, hardship, and food insecurity.

The food retail industry—which consists of grocery stores; specialty food stores (such as “natural” or “organic”); and general merchandise stores (such as Wal-Mart or Target)—is growing faster than private sector industry and employs almost 400,000 people in California. The expansion of non-unionized, general merchandise stores presents a threat to more traditional grocery stores that cannot compete with these stores without lowering their own costs. Whereas the prices of rent and supplies are mostly inflexible, the cost of labor is not. Traditional grocery stores have been lowering costs by offering lower-wage, part-time work instead of full-time employment, lowering wages over all, and unpredictable employee scheduling.

Despite the growth of the food retail industry, workers’ wages and working conditions are eroding.

The cuts to labor costs have a large impact on workers. Almost half of all food retail workers report earnings that are below the poverty line and people of color in the industry are almost twice as likely to earn wages below the poverty line. The lack of full time employment also has a huge impact on workers. Inconsistent scheduling, for instance—which maximizes business efficiency by assuming that employees have infinite flexibility—makes it difficult for part-time employees to secure a second job. Fluctuating hours mean fluctuating incomes, making it difficult for workers to consistently plan for and pay bills.

Additionally, as stores become increasingly less specialized, there is a general reduction of middle management positions resulting in a lack of upward mobility. Many employees do not ask for better working conditions (e.g. consistent schedule, more hours, better equipment, etc.) for fear of getting their hours cut. Part-time employees, who make up a majority of the employees in the industry, do not receive benefits such as sick pay; almost 65 percent of food retail workers reported working while sick. Even those who receive sick pay often continue to work while sick, due to chronic understaffing. Cost-cutting strategies have also led to fewer workers and the speeding up of work, resulting in more injuries. In theory, employers recognize that better wages and full-time positions are key for employee satisfaction and overall employee productivity yet the industry norm of cutting-cost makes it difficult for employers to practice.

These labor practices result in high costs to the public with regards to public health and public income. Low wages, coupled with a lack of benefits, means that many food retail workers not only work while sick, but also send their children to school sick, since they are unable to stay home and care for them.  Additionally, work speed-up and understaffing undermine consumer health, as many workers must rush to do their jobs in ways that threaten food safety. Low-wage jobs and lack of benefits also result in higher costs for the public, as many of these employees are dependent on social programs to live a dignified life; more than one third of food retail workers rely on public assistance.

Furthermore, food retail workers report a high level of food insecurity. Shelved finds that “workers who sell food in California are almost twice as likely as the general population to not be able to afford to eat the food they sell or the healthy kinds of food their families need.” [1. Saru Jayaraman and the Berkeley Labor Center, Shelved: How Wages and Working Conditions for California’s Food Retail Workers Have Declined as the Industry Has Thrived. University of California, Berkeley (June 2014). p. 7.] This highlights the fact that physical access to food is not sufficient for solving food insecurity. Opening a grocery store in an underserved neighborhood will not achieve much if those in the area—and the store’s employees themselves—cannot afford to buy the food.

What is to blame for the erosion of wages and working conditions? In part, Shelved identifies a process of “financialization” of the food retail sector, defined as the “general trend of allocating corporate resources to meet the short-term interests of shareholders as opposed to investing in improved products and services, operational innovation, or human capital.” [2. Saru Jayaraman, Shelved. p. 97.] In other words, food retail has been increasingly placing investors before workers.

Costco has demonstrated that it is possible to be profitable while also offering full-time positions with livable wages.

A growing body of literature, however, shows that labor cost-cutting strategies are not effective in reducing costs, increasing profitability or improving productivity in the long term. For example, the general merchandise and food retail store Costco has demonstrated that it is possible to be profitable while also offering full-time positions with livable wages. The partially unionized Costco has the highest wages in the industry and its market share continues to grow.

Higher wages and a successful business model are not mutually exclusive. Nonetheless, notes Shelved, business cannot be depended on to raise wages and improve working conditions of their own volition, which is why public policies are needed to “help the food retail industry fulfill its potential to provide quality jobs.” [3. Saru Jayaraman, Shelved. p. 15.] Thus, the report makes the following policy recommendations:

• Raise wages for food retail workers.
• Reduce incentives for employers to cut workers’ hours and pay poverty wages.
• Support organizing efforts among workers; create a level playing field for unionized employers; and predicate government subsidies on the provision of quality jobs.
• Enact legislation that eases the hardship caused by workers’ lack of schedule control.
• Support job training programs that promote higher standards of health and food safety for workers and consumers.
• Protect workers from violations of wage and hour, health and safety, and equal opportunity employment laws.
• Establish standards for sick days to be used to recover from illness, access preventative care, or provide care for sick family members.
• Support further research on the impacts of the low-cost retail model and on the benefits of alternatives.

With the right policies in place, the food retail industry can be a source of thriving business as well as dignified employment and wellbeing for all workers and consumers.

Click here to download the full report.