Grocers Study: Extra Pay Mandates To Raise Prices $400 Annually For Families

LOS ANGELES (CBSLA) - As the city of Los Angeles considers a plan to mandate in hazard pay for grocery workers and others working during the coronavirus pandemic, a state grocers trade group is warning prices could soar higher if such a plan is adopted.

A new study released Thursday by the California Grocers Association found that extra pay mandates of up to $5 per hour for grocery workers could raise consumer grocery prices by about $400 annually for the typical family of four.

The study evaluated how extra pay proposals in the cities of Long Beach - which passed earlier this month - and Los Angeles would impact grocers, workers and their customers.

According to the study, the extra pay mandate in L.A. would raise grocers' labor costs by about 28 percent and would be twice the size of the of the 2020 industry profit margin and three times the historical grocery profit margins.

If the L.A. ordinance were implemented citywide and grocers passed through 100 percent of the cost, residents there would pay $450 million more annually for groceries.

At the state level, such a move would cost consumers $4.5 billion in additional grocery costs, the study found.

"Extra pay mandates will have severe unintended consequences on not only grocers, but on their workers and their customers," said Ron Fong, president & CEO of California Grocers Association, which commissioned the study. "A 28 percent increase in labor costs is huge. Grocers will not be able to absorb those costs and negative repercussions are unavoidable."

Among the study's findings: a store with 50 full-time equivalent employees would take a reduction of 11 employees to offset the increased wage costs, or a 22% decrease in staff - if an extra pay ordinance was passed.

If the mandate were imposed statewide at $5.00 per hour, the job loss would be 66,000 workers, the group said.

The study was conducted by Mike Genest, the former Director of the California Department of Finance and Brad Williams, the former chief economist for the California State Legislative Analyst's Office.