In February, a news feature in an issue of SN predicted that the spate of expiring labor contracts this year was a harbinger of no less than a "gathering storm."
Well, it looks as though the storm has not just gathered, but, as of late last week, was sending vigorous bolts of cloud-to-ground lightning into California, Missouri, West Virginia, Ohio and Kentucky.
There are copious details from the labor front in the news article on the front page of this week's SN. But for now, let's figure out what's in back of this sudden bombardment, other than expiring contracts.
The nexus of labor strife is Southern and Central California, where some 70,000 workers were on strike or locked out. Much of the dispute centered on a proposal to boost workers' contributions to health care benefits. The proposed implementation of a two-tier salary structure was at issue, too.
It's clear that supermarket retailers in California and elsewhere are seeking to reorder their cost structures because of competition -- current or anticipated -- from Wal-Mart Stores, the nation's premier low-price retailer. Wal-Mart has averred it will plant 40 or more supercenters in California in upcoming years. This is frightening to incumbent retailers chiefly because of Wal-Mart's inexorable acquisition of market share. Much roadkill results, and it's not pretty.
Although it has long been an article of faith in supermarket retailing that shoppers pick a shopping venue for reasons other than price, when the price spread gets too great, that wisdom goes out the window. The price-point differential is probably twice or more the 8% many deem sufficient to permanently alter shopping habits.
Wal-Mart is able to lower prices because of its much-vaunted buying prowess, offshore sourcing and distribution efficiency. But another enabler is the yawning wage gap between its own non-organized labor force and the organized labor at many conventional supermarkets.
In 2001, the average Wal-Mart store clerk was paid $8.23 per hour, or $13,861 per year. Organized supermarket workers are paid 20% more than that, on average, and often far more. (This data is according to a news feature in the Oct. 6 issue of Business Week. The wage figure evidently assumes a 52-week work year at about 32 hours per week.) Wal-Mart's size is unprecedented in the history of the world, and not just in revenue terms. It employs some 1.4 million worldwide. How can any retailer paying a higher wage compete, especially given the slim possibility that Wal-Mart will ever succumb to organized labor?
Vexing cosmic questions arise, too. These include the long-term viability of a consumer-led economy in the context of wages so slight, price deflation, the exportation of manufacturing capacity from these shores, large-scale unemployment, vendor control and whether employers' benefits are the right place to seat medical coverage for a large proportion of the population.
So there's a great deal more than a labor spat going on here. Indeed, the present labor situation may prove to be the opening episode in the eventual rejiggering of how the economy is ordered as the air goes out of wages and spending capacity.
