Business Update with Mark Lacter

Supermarket Settlement; Tech replaces workers

KPCC's business analyst Mark Lacter talks about the tentative agreement between the grocers union and supermarkets.

Steve Julia: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, did we dodge a bullet with the supermarket settlement?

Mark Lacter: Sure did – and what a difference from 2003 when the major chains, Ralphs, Vons and Albertsons, were almost gunning for a long strike because they were so committed to cutting health care costs. This time out, the contract with the grocers union expired in March, and since then you just had the sense that both sides were holding out hope that the other one would blink first. Well, it looks like they both blinked, though they're not quite describing it that way. Health care was again the big sticking point - specifically concerns by the union that its health care trust fund was being depleted because many of its members were choosing not to pay in to receive coverage. They say it was costing too much..

Julian: Details are still pending on the settlement, but what's your early take?

Lacter: This seems to be a good outcome for the chains and the union because a walkout of any duration could have been pretty damaging. For the union, it would have put around 60,000 people out of work at a time when the unemployment rate in L.A. County is 12.5 percent – and according to a pretty downbeat forecast this morning by UCLA economists, it’s not likely to improve much through next year. Also, Steve, the union might not have had nearly as much public support as it did back then, when a lot of the customers refused to cross picket lines. This time out, lots of other people are struggling so it's just a different dynamic.

Julian: And what about Ralphs saying it would close all its stores in the event of a strike and Albertsons saying it would close 100?

Lacter: That’s right. They stayed open last time, so this would have raised the stakes for both sides. Of course, the biggest inducement to reaching a deal was competition. Keep in mind that in 2004 the three chains had a market share of almost 60 percent; today it's dropped to about 23 percent. That’s a stunning decline and it’s the result of more folks shopping at other non-union stores. And it's clearly had an effect: since the last walkout, the three chains have closed more than 160 stores. So, union officials were in a bind because they have fewer members. The chains were in a bind because they have more competition. No wonder they cut a deal.

Julian: The workers have more than competition to worry about, too.

Lacter: All workers, Steve. If you look at the state and local jobs report for August, what’s striking isn’t so much the number of job losses, but the small number of gains. You can't expect a full-fledged recovery if businesses don't hire. But just because businesses aren't hiring doesn't always mean they're struggling. We continue to see technology allowing companies to do more with less - sometimes a lot more. This has been going on for many years in the manufacturing sector, but now it's migrating to other types of industries.

Julian: So how are gizmos replacing people?

Lacter: Well, you have the restaurant owners supplying their customers with iPads. The iPads take orders and tally up the bill without the need of a waiter. You're also seeing startup firms doing just fine with fewer workers by outsourcing stuff like accounting and IT. As a result, startups are launched with an average of just under five employees. That’s down from seven-and-a-half employees in the 90s.

Julian: That adds up to a lot of jobs that simply aren't happening...

Lacter: Yeah, it really does. And there's no question that it's had an effect on the employment market. Of course, not every transition to technology works out. I just read a chain of grocery stores in New England is doing away with all its self-checkout stations because too much goes wrong with the machinery - and then an employee has to be on call to solve the problems. I think we’ve all run into that sort of thing and it’s kind of defeats the purpose of having a machine do the work instead of a cashier. So a little bit of a break for workers, but the overall trend line is not so great and it may help explain why economists are so downbeat about future hiring.

Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.


blog comments powered by Disqus