MINIMUM WAGE HIKE'S IMPACT WILL VARY

JOANNA RAMEY, JENNIFER BALJKO and DAVID ORGEL

WASHINGTON -- Although the supermarket industry opposed a minimum wage hike, President Clinton's approval of a 90-cent increase last week doesn't stand to immediately hurt many major operators, according to executives and analysts.

Many operators already pay at or above the new minimum wage scales, and supermarkets dodged a bullet when Congress opted not to make the law retroactive. Unionized supermarkets could even be aided by the hike, since nonunionized competitors in other formats will be forced to raise wage rates, observers said.

Small supermarkets will feel more of a hit from the federal wage increase, which may lead them to think twice about extra hirings. The new law may also fuel a longer-term rise in wages that eventually affects supermarkets more broadly.

The hike President Clinton signed into law last week becomes effective Oct. 1. The current $4.25-an-hour minimum wage will increase in two stages: a 50-cent rise on Oct. 1 followed by a 40-cent increase Sept. 1, 1997. The increases won't be retroactive to July 1, which had been considered.

"The big obstacle would have been going back and paying someone retroactively," said Tom Wenning, senior vice president and general counsel at the National Grocers Association, Reston, Va.

Still, the wage hike will spell headaches for some companies, even those already paying over the federal minimum, said Wenning, who forecasted a "ripple effect" on wages as entry-level wages rise.

The hike's impact, though, will vary by area. Industry officials say it likely will be felt more in rural areas and in cities with big labor pools or those that don't have inflationary pressures on wages. Companies that can't afford the wage increases may instead cut employee hours or the number of workers.

Although food wholesalers, which already pay more than the new minimum, may experience the "ripple effect," the higher wage probably will be felt when their customers start getting pinched, said John Block, president of Food Distributors International, Falls Church, Va. Restaurants likely will get hit the hardest among food distributor customers, followed by supermarkets and convenience stores in rural or traditionally low-wage areas, he said.

Jack H. Brown, chairman, president and chief executive officer of Stater Bros. Markets, Colton, Calif., said smaller operators stand to be most affected. "The minimum wage in California is higher than the federal minimum wage," he said. "The chains have a higher starting wage than the federal starting wage. My concern is not for my company. My concern is for the small businesses where someone may go for their first job. That operator may hire less people because he'll be paying more."

Robert Piccinini, president and CEO at Save Mart Supermarkets, Modesto, Calif., said that with about 90% of his company's stores unionized, "even a major rise in the minimum wage wouldn't get close to where our lowest rates are." Competitors like Wal-Mart might be hurt by the new wage, he added.

Yet the hike could help the competitive position of many major supermarkets, according to Gary Giblen, managing director at Smith Barney, New York.

"Basically, the big chains are paying well above minimum wage," he said. "In the short-term, it actually helps the chains and levels the labor playing field. It might be another factor for supercenters and a nail in the coffin of the supercenter.