Outcome of Grocery Negotiations Prove Two-Tier Systems Don't Work

One of the main goals of the grocery workers for the contract negotiations was the elimination of a two-tier wage system. They argued that it was bad for business and employees. Turns out that the big chains agreed and it should send a cautionary message to other employers: "two-tier pay scales are trouble." The last contract overwhelmingly benefited the big chains, but it turns out that what they wanted caused more trouble than it was worth. The LAT does a good job examining how the chains came to see the workers side of things on the issue and how the two sides worked together on other issues like health care.

Almost from the day the last contract kicked in, the two-tier system irritated workers and frustrated mid-level managers in the stores. It was a priority for union leaders to end the system with the new contract.

Although such a system looks like a great way to cut expenses without slashing into the benefits and pay of existing workers, the typical result is labor disharmony, Jacobs said.

New employees resent getting paid less for doing the same tasks as the veterans, he said, and veteran workers get irritated at the constant turnover in the ranks of the new employees and the stress of working with untrained workers.

Jacobs studied UFCW enrollment data and found that under the two-tier contract turnover rates for workers on the jobs for less than a year soared to 52% from 29%. Overall turnover jumped to 32% from 19%, he said.

"It was a case of be careful what you wish for," said Greg Conger, president of UFCW Local 324 in Buena Park.

The turnover lead to decreased productivity and increased training/recruiting costs. It simply was not worth the initial salary cost savings. A happy worker is a productive worker.

The agreements on health care have lead some to say that it could serve as a model for other contracts across the country. One key piece was the inclusion of free or reduced-cost programs for quitting smoking, weight management and others. The goal is to reduce health care costs by creating a healthier workforce, a win for all sides.

The agreement pays 100% of the coverage for preventive care such as physicals, mammograms and well-child care and reduces prescription payments for maintenance drugs for chronic conditions such as diabetes and asthma.

"There is a huge focus on prevention and wellness that should help reduce the growth in expenses," Herglotz said.

That is something both sides want. The workers have already agreed to an increase in the amount they pay each month for coverage. Any hope of eliminating another increase in the next contract will be dependent on keeping expenses down.

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The new contract also provides for a health reimbursement account.

Each year, the employers will set aside $500 per individual and $1,000 per family in an account that can be used to pay for doctor visits, lab tests, chiropractic visits, X-rays and prescription co-payments. Any unused credit at the end of the year will roll over to succeeding years.

Herglotz said the employers believed the accounts would make employees more savvy on health issues, leading to lower costs.

Now, this sounds a lot about the Health Savings Accounts that have been much maligned. However, this is different. The employees will already have coverage. This will be for the small stuff that is outside the the general coverage. Time will tell if this effective or not. It could go the way of the two-tier system or it could help keep costs down. If it reduces worker's tendency to go get things taken care of when they first crop up, it will not serve the function the employers are hoping for and lead to complications down the road.

Hopefully, other companies will learn from the lessons learned in Southern California and negotiate fairly with their employers. A lot can be accomplished, if all sides work together. A contract where one side dominates the other is not helpful to either.