Grocery Retailers Benefit from Lower Union Wages

[Omaha Steve]

http://seekingalpha.com/article/114501-grocery-retailers-benefit-from-lower-union-wages

January 13, 2009 | about stocks: GAP / KR / SVU / SWY / WINN

I remember a quarter of a century ago when I was member of the UFCW's local 324 labor union. I was a journeyman grocery clerk, working for Alpha Beta, a division of American Stores (since swallowed up by SVU). At the time, I was well paid, with a base rate of $11.80 per hour, plus added compensation, such as triple time on holidays, time and half on Sunday's and night premium. There was even more, if you were bestowed the special honor of being the Key Carrier/ Person in charge during the night shift (you also got to wear the blue vest) you were paid a whopping $1.00 extra for your entire shift (Wow! an additional 12 cents an hour for the added responsibility of being in charge).

We had no scanners, ringing up the groceries on the cash register wasn't as easy, the cashier was burdened with separating the non food items from the food items, so sales tax could be manually computed. Have we ever come a long way! Today, grocery chains are trending more to self checkouts and computers work for a lot less than people, while never asking for coffee breaks.

It was a great job for me through high school and college. As a matter of fact, I liked it so much , that when I was about to leave in July 1984, to take my first "real" job, I asked the store manger if I could stay on for a while. He told me it would be better if I made a clean break. It was hard to leave, as I appreciated every facet of the job, especially the social aspects of it. I found it enjoyable, helping customers, and it was a great place to meet women (yes, I met my wife there).

I bought my very first stock at the age of 17, when I began having $15 per week deducted from my paycheck to acquire American Stores shares. I recall four or five years later my manager said the stock was positioned to skyrocket due to the success of its East Coast Acme Stores division's successful turnaround, but turned my nose up to his advice, thinking what does he know, after all, I'm the college graduate in finance. He was right, and I was wrong, as the stock skyrocketed tenfold over the next decade - unfortunately I had already sold it.

I learned a valuable lesson. The moral of the story is: it is dangerous to overestimate yourself while underestimating others. I guess I was just young and dumb. My experiences in the grocery business have had a profound effect on me and its nostalgia has prompted me to make the sector one of my favorites to invest in and follow.

Wage progression has been poor: Management has done a good job negotiating labor agreements with the union. The grocery chains have certainly came out ahead in this department.. The current top wage for a grocery clerk in Southern California is $17.90 per hour, which represents an increase of about 52% over the past twenty five years. If you do the math, you will determine organized labor has truly received the short end of the stick, as their pay has actually dropped significantly when you factor in the effects of inflation. Their average wage hike per year for the past 25 years has equated to about 1.5%, including the power of compounding.

FULL story at link.