Explaining Southern California's economy

Bullet Points: Is the grocery workers' new contract a good deal?

Details on the new contract that the UFCW and the major California grocery chains negotiated — and that the union's membership has now approved — are still somewhat sketchy. I'm going to try to find out exactly what the numbers are, but in the meantime, here's a quick breakdown. 

  • According to the LA Times, UFCW members will now pay $7/week for individual health care and $15/week for family care, beginning next April. My understanding was that when a strike was in the offing, the chains wanted $9 and $23, for individuals and families respectively. But prior to this contract most employees were paying $0 for their health care, although so-called "second tier" workers — those hired after the strike in 2004 —were paying $7/$15. So my reading of the new contract is that ALL workers are now contributing to the fund. So while the stores didn't get the contributions they wanted, they did get everyone to contribute the pot, which means that...
  • ...the stores apprently don't have to up their contribution to the health care fund to insure its solvency. The fund had hit trouble because it had been running a deficit, tapping its reserve to cover health costs while operating under the terms of the 2007 contract. Back in 2007, the union and the chains had worked out a deal whereby the stores would be able to reduce their contribution to the health fund, from $3-4/hour to $2-3/hour, in exchange for not adhering to the provisions of the two-tier hiring structure. It bugged me that the union had in effect turned over what was a $260 million health-fund surplus to the stores, but a spokesman for the UFCW pointed out that this enabled the union to get many more families insured.
  • So under new contract, the UFCW's entire membership is insured, and although everyone is contributing. their contributions look like 2007 amounts, rather than 2011 numbers. That's a qualified win because the stores have successfully shifted a significant burden of health costs to workers who were formerly paying nothing. It looks as if they're "subsidizing" this with a wage increase. But there's a problem here, which is that health care costs are rising at a torrid rarte, much faster than wages can keep up.
  • The union was up against a very weak labor market and the threat from some of the chains to close stores. That probably took away some incentive to strike. But if you look at the cost of the last strike, estimated at $2 billion for the stores — not to mention their market-share loses to newcomers and upstarts — you could argue that the chains were willing to spend somewhere between $2 and $8 per union member or family per week, by reducing what they orginally demanded as a health contribution, to avoid losing money and share again.


Reportings: Grocery strike; Netflix screw-up; Jerry's veto

Still no grocery strike in Southern California. But you have to wonder why the union and the big chain stores — Albertsons, Ralphs, and Vons — couldn't figure out how to resolve the problems with a jointly administered health care fund before now. VoiceofOC.org provided a blow-by-blow back in June, explaining how the fund was allowed to rapidly move from surplus to looming deficit. (VoiceofOC.org)


Speaking of which, the LA Times thinks a strike now would be a very bad move for the chains: "Today, Ralphs, Vons and Albertsons have fewer stores in Southern California, and fewer employees. Albertsons has closed 67 locations since the 2003-04 strike and worker lockout. Ralphs has closed 48 stores, and Vons and Pavilions are down 47." (LAT)


Netflix CEO Reed Hastings' solution to the epic screw-up of raising prices on subscriptions: The smaller DVD-by-mail business will now be spun off into a new company, Qwikster, presumably allowing Netflix to restore its brand. How long did it take to think up that new name? (NYT)


Southern California grocery strikes and disruptive innovation

Here’s a story we’re following closely at SCPR/KPCC: the possibility of a strike by grocery workers in Southern California: 62,000 of them, who work at Ralphs, Vons, and Albertsons stores. Over the weekend, the United Food and Commercial Workers union voted to authorize a strike -- which isn’t the same thing as going on strike. But it does set the stage.

The last time there was a strike, in 2003-04, it didn’t go well for the the major unionized chains. This from the LA Times:

The drawn-out negotiations has area grocery workers nervously recalling the bitter debate over wages and healthcare benefits that led them to the picket lines seven years ago. In fall 2003, the labor dispute led to a contentious 141-day strike and worker lockout that affected hundreds of California grocery stores.