Health Care Hazard

What the California grocery war means for the future of labor and health insurance

The end of February 2004 also saw the end of the 141-day Southern California grocery war. It started on October 11, 2003, when members of the United Food and Commercial Workers (UFCW) union at Vons and Pavilions—both supermarket chains owned by the Safeway Corporation—went on strike. In an act of business-class solidarity, two other grocery chains, Ralphs (owned by Kroger) and Albertsons, locked out their union employees.

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The central issue during the dispute was the rising cost of health care and the question of who should bear the burden—grocery chain owners or employees. This battle over health care drew national attention to the larger struggle over spiraling health care costs; the erosion of employer-based health insurance; and the specter of large-scale retail business based on low-wage employment and low-cost manufacturing.

The Strike
At the time of the strike/lockout, the UFCW in Southern California represented 59,000 workers at the major grocery chains. Their existing contract with the grocers guaranteed a single-tier workforce and company contributions to a health care fund that would maintain an adequate level of health benefits.

In 2003, the grocers entered into negotiations with the goal of reducing their labor costs in two ways: by instituting a two-tier workforce; and shifting part of the burden of the health care fund to workers. The two-tier workforce would create a system that pays new employees substantially less than existing employees for doing the same work. The shift in the health care costs would force employees to pay a weekly premium for their health insurance, while allowing the companies to cap their contributions to the health care fund—with no guarantee that existing benefits would be maintained. 

Despite the solidarity among UFCW members, assistance from other unions (notably the Teamsters), and community support and boycotts (the grocers lost approximately $1 billion in sales), the final settlement favored the companies’ demands.  While not as onerous as the original offer, the settlement established a two-tier system with no guarantee of health benefits.  In the prior contract, wages ranged from $9.80 to $17.90 per hour; in the new contract, the lower tier will be paid as little as $8.90 to $15.10 per hour.  In addition, while the union was able to protect the existing health care coverage for two years, it is expected that in the third year, that will change. Upper-tier workers may be forced to choose between a substantial increase in premiums or a radical reduction in coverage; lower-tier workers will likely be able to afford only a bare-boned insurance plan, or no plan at all.

Labor, Health Care and Globalization
The Southern California grocery war symbolized key features characterizing labor strife throughout the United States today. Prior to the new contract, unionized supermarkets offered decent salaries and good health benefits.  It was one of the few industries where working people from communities of color could make a living.  Now, the supermarket chains are taking steps to transform these good jobs into bad jobs. Newly hired workers will find themselves with lower wages and virtually no health benefits; existing employees will face lower living standards because of less health insurance coverage or higher premiums (and therefore, less income to spend on other necessities).

These trends toward low-wage employment and few benefits are spreading, and labor battles are predicted in industries ranging from hotel chains to hospitals. During 2003, health care was the dominant issue in half of the major labor negotiations in California. For a variety of reasons, the old health insurance system, which was a patch quilt of employer-based coverage and government-provided coverage, has broken down.  Any attempt to reconstruct the system based principally on individual coverage tied to individual jobs fails because, today, most jobs do not provide health insurance and few workers have long-term relationships with a single firm. With no viable single-payer alternative, attempts by businesses to further privatize health care provisions dominate.  This forces unions, who have won excellent coverage for their members, into defensive battles with aggressive employers.

Throughout contract negotiations, grocers in Southern California evoked the shadowy image of Wal-Mart as the rationale for their actions—despite the fact that Wal-Mart does not operate a supercenter in the region. Wal-Mart is both a symbol for the low-road economic path—low wages, few benefits, no career ladder—and a model of retail organization in the era of corporate globalization.  As a symbol, Wal-Mart represents large-scale retail development that eliminates small businesses domestically and is based upon low-cost manufacturing internationally. 

However, Wal-Mart is not the only retail company that uses this business model. Target and K-Mart also have supercenters. Many of the factors that turned Wal-Mart into the world’s largest corporation are available to its competitors. These factors include the technology that allowed Wal-Mart to grow rapidly in low-density areas (the South, rural America); low-cost manufacturing that Wal-Mart uses to supply cheap products to its stores; and a low-wage labor force.
Challenges Ahead
The Southern California grocery strike was not the first battle against the low-road economic path and corporate globalization, nor will it be the last.  Contracts for UFCW members in Northern California expire this summer (Sacramento Valley) and fall (the Bay Area). These negotiations will cover approximately 55,000 workers. It is likely that grocers will attempt to bring the elements contained in the Southern California contracts to these bargaining sessions. 

To fight these trends, progressives need to mount campaigns that provide an alternative vision of economic development. Union and community activists need to join together to wage an effective defensive battle to preserve the real buying power of workers, and to fight the attempt to either reduce health care coverage or shift a disproportionate share of the cost to employees. At the same time, this labor-community alliance needs to wage a proactive campaign to transform the nation’s health care delivery system as well as the economic development systems. 

A better health care system would be patient-centered (instead of profit-centered) and grant full access to health care. A better path to economic development would establish basic labor standards; facilitate unionization; provide social insurance to workers during periods of economic change; link education and job training to existing good jobs; encourage high-density economic development; and promote community-based ownership of economic assets. 

Steven Pitts is an economist at the University of Calfornia-Berkeley’s Center for Labor Research and Education.