The COVID-19 pandemic forced the food retail industry to innovate faster in 2020 than ever before, but also meant “windfall profits” for many food retailers as people stocked up on food and restaurants closed their doors. According to a Brookings Institution report published in late 2020, top retailers earned an average of 40% higher profits in 2020 over 2019, and stock prices rose an average of 33% over the same period. During this unprecedented period of profit, workers at the front lines of food retail operations faced heightened and often deadly risks, with uneven protections and compensation for taking on those risks. The pandemic also revealed existing food retail labor challenges, including low wages for frontline workers, that were exacerbated by the transformed economy, often hitting harder along racial, income, gender, and generational lines. As the new Delta variant leads to new shutdowns and higher risks for retail workers, the lessons learned during the first year of the pandemic take on added urgency.
Uneven Protections for High-Risk Retail Essential Workers
The food retail industry employs 2.97 million people in the U.S. The majority of these are frontline workers, including cashiers (24.9%), retail supervisors (16.7%), stockers or order fillers (12.5%), and other roles, like bakers, butchers, cooks, and food service workers who have regular contact with the public or other workers. COVID-19 has pushed the industry to think of these frontline workers in terms of the risks they face to provide essential services, its role in protecting them, and how they should be compensated for that risk.
Early in the pandemic, grocery store workers did not always receive the protections they needed to stay safe while ensuring that customers had access to food. Some retailers, including Whole Foods and Walmart, began instituting mandatory mask requirements even before individual states, OSHA, or the CDC issued voluntary worker safety guidelines for retail operations. But protections were uneven across retail chains, even as chains hired hundreds of thousands of additional workers to meet the demands of increased shopping in the first months of the pandemic. This reflected the wide disparities in mandated grocery store worker protections across states, ranging from limiting store occupancy, providing personal protective equipment like masks or sneezeguards at registers, or offering paid sick leave to ensure that workers experiencing symptoms could stay at home without impacting their income. Furthermore, most states left grocery workers off vaccine priority lists.
Even when protections were mandated or voluntarily implemented—many of which were for the protection of both grocery store workers and customers—store employees still had to serve customers who refused to wear masks or stay socially distanced. Retailers took creative steps to convince customers to mask up. The Maine Grocers and Food Producers Association worked with local partners to launch a “Let’s Be Kind” campaign wherein customers and workers were encouraged to take precautions and respect everyone, appealing to their shared sense of humanity. Christine Cummings, the association’s Executive Director, reported that “patience and respect is crucial as we navigate this new normal.”
“Hero Pay”: More Than a Temporary Solution
The pandemic revealed the tension between the notion of grocery workers as “essential” and the fact that the frontline labor force was already overwhelmingly made up of lower-wage workers before the pandemic. According to salary.com, grocery store cashiers make between $11 and $14 per hour. The median of $12 per hour is above the federal minimum wage of $7.25 per hour, but below the U.S. living wage of $16.54 defined by MIT’s Living Wage Calculator in 2020. And it has not gotten better over time. A 2014 report by the Labor Center at UC Berkeley highlighted how California’s food retail workers actually experienced declining wages and worsening working conditions between 2000 and 2011, even as the industry thrived.
While the pandemic placed retail workers at risk, retailers responded in differing ways to compensate them for that risk. The New York Times reported in March 2021 that according to the United Food and Commercial Workers Union, at least 34,700 grocery workers in the U.S. had been infected with or exposed to Covid-19, and that at least 155 workers had died from the virus. Some retailers initiated hazard or “hero” pay initiatives at the outset of the pandemic as food retail workers were praised as essential, while other retailers were criticized for not sharing enough of their windfall profits with workers on the frontline in stores. The 2020 Brookings Institution report cites that of ten food retailers included in its study, nine implemented temporary hazard pay increases in the first months of the pandemic, or only issued one-time bonuses to workers, while only one permanently raised wages.
A Walmart-sponsored report by McKinsey & Company found that the inequities in opportunity and wages in the labor market fall along racial lines. The report found that Black workers “are overrepresented in low-growth geographies and in frontline jobs, which tend to pay less.” Exposure to risk and lack of hazard compensation also fall along racial lines. According to The Lancet, exposure and death rates have been especially high among communities of color compared with the overall population, partly because frontline workers disproportionately are people of color, placing them at higher risk of infection and death from COVID-19. The fatal combination of low hourly wages, no federal requirement for paid sick leave, and the fact that paid sick leave is not often a regular benefit offered to hourly employees means that a sizable percentage of grocery workers report having to trade health and safety for a paycheck.
These inequities also disproportionately impact women and older generations. According to the Network for Public Health Law, 21% of grocery employees are over the age of 55, at higher risk of complications and death. Finally, the pandemic exacerbated the lack of childcare options for women workers, forcing women out of the labor market at a higher rate because they were unable to find or afford safe care for their children.
Success Stories Show What Is Possible
How are food retailers to respond to these facts while maintaining the trust and loyalty of their workers and their communities? With an average gross margin of between 1% and 3% before the pandemic, a food retailer is keenly aware of the impact of labor costs on their business’s profitability and has little flexibility to invest in better worker benefits or protections than are necessary or mandated by law. But stories of successful efforts to pay higher wages and increase benefits on a permanent basis are increasingly more common in newsfeeds and show that these measures can translate into safer employees and customers, as well as lower costs.
A 2019 Supermarket News article—published pre-pandemic—cited Kristi McFarland, Chief Strategy officer of New Seasons and New Leaf Markets, as saying that the $15 per hour starting pay they instituted resulted in “improvement in operational and staffing metrics, such as turnover, which will improve our overall performance…that allows us to offer competitive pay and a comprehensive benefits package at costs significantly below industry benchmarks.”
The pandemic has spurred more retailers to raise compensation rates to retain their operational advantage or retain workers. Costco announced in early 2021 that it was raising its starting wage to $16 an hour, a full $4 above the industry median wage. Noting that “this isn’t altruism,” Costco’s CEO, W. Craig Jelinek, told NPR that the wage raise confers a competitive advantage for the company, reducing costs by shrinking employee turnover and maximizing productivity.
Texas retail chains faced overwhelming competition for workers as the state began opening up in March 2021. The human resources news site HRDive reported that retail chain Brookshire Grocery Co. made a $33 million investment in permanent pay raises and a higher starting wage of $11 per hour, while the retailer H-E-B raised its hourly starting wage to $17.50 per hour for Houston warehouse workers in an effort to attract and retain staff. Competition for workers has not let up for retailers as states have opened up, causing RetailWire to state in May of 2021 that retailers simply “can’t afford” to pay workers less than $15 per hour, the “new ante.”
Other retailers have gone beyond committing to ensuring living wages among their own employees and are working to ensure living wages throughout their supply chains as well. In January of 2020, a group of seven German retailers including ALDI Süd and Nord (ALDI Nord is the parent company of U.S. chain Trader Joe’s), signed a voluntary commitment to ensure that farmers and other suppliers “have a decent standard of living” and that human rights are being respected in their supply chains. ALDI Süd and Nord groups followed up on this initial commitment in June of 2021 with a position statement on providing living wages and living incomes in their supply chains, stating that these are “an integral part of human rights if we want to address inequality and eradicate poverty.” BananaLink reported that this effort came after years of international suppliers complaining of “downward pressure on prices which do not meet producers’ costs of sustainable production, and do not take into account the internalization of costs, such as paying decent wages or affording investments in environmental improvements,” and applauded ALDI’s steps.
It is becoming clearer that equitable compensation is good for business. Well-paid workers also mean more resilient communities. The pandemic has shown that grocery stores are critical to their communities’ resilience, and now have the momentum needed to really become pillars of their communities. Their employees live in those communities, and if employees can stay in rewarding, stable retail jobs, their families have stable purchasing power, benefitting businesses, employees, and the community.
Public Sector Support Is Needed
Many proposals are on the table to benefit workers as well as support businesses:
- Raise the federal minimum wage: The first is to raise the federal minimum wage from the current $7.25 per hour to $15 per hour. The Raise the Wage Act of 2021, introduced in the Senate on January 26, would immediately raise the federal minimum wage to $9.50 an hour if enacted, and would incrementally raise it to $15 an hour over five years.
- Support for families with children: President Biden’s American Families Plan aims to help the more than 2 million women who left the workforce due to the pandemic return, through direct support that would help families better afford childcare and basic needs. Additionally, the plan calls for a partnership to provide universal preschool to all 3- and 4-year-olds, prioritizing high-need areas and supporting family members in returning to work.
- Mandated paid sick leave: Congress passed the Families First Coronavirus Response Act in March of 2020, which mandated paid sick leave for employers with fewer than 500 employees and all public employers, and provided tax credits to employers to cover the cost of leave days; however, those protections were not made permanent. Making these kinds of protections permanent would help keep retail hourly employees as well as customers safe, and ensure that employees can still pay their bills even if sick.
- Incentives to work: In May of 2021, GroceryDive reported that the National Grocers Association (NGA) had called on the Biden administration to go beyond measures it had unveiled to get workers back to work, including childcare assistance, unemployment counseling, and credits to businesses to hire and retain workers, to help ensure that food retailers are able to find and retain qualified employees.
This article was published in partnership with Presidio Graduate School.