Kroger will be shutting down two Ralph’s locations and one Food 4 Less store, as Los Angeles recently passed a $5 “hero pay” temporary wage hike for pharmacy and grocery workers.
The ordinance from the L.A. City Council — approved on March 3 and spoken of highly by Mayor Eric Garcetti — was intended to incentivize and thank workers in high-risk fields.
“It’s never our desire to close a store, but when you factor in the increased costs of operating during COVID-19, consistent financial losses at these three locations, and an extra pay mandate that will cost nearly $20 million over the next 120 days, it becomes impossible to operate these three stores,” Kroger said in a statement, according to KCBS-TV.
The three locations were reportedly already underperforming, so the 120-day wage hike from the $18 per hour employees were already earning was the final nail in the coffin.
The grocery store chain took similar action in closing down two stores in Long Beach, California, after a $4 “hero pay” ordinance was approved in that city as well.
It's not their place to dictate the wages paid in the private sector!! Where are these people supposed to go for their groceries now?? EPIC FAIL!!
— Geri Ann Rasmussen (@RasmussenGeri) March 11, 2021
The two closures put nearly 200 jobs at risk and likely resulted in several lay-offs, Long Beach Post News reported.
Although it is clear that cities with “hero pay” ordinances have good intentions, such laws ultimately serve as an experiment for hefty minimum wage hikes.
People will not only be unemployed — which, by the way, provides an hourly wage of $0 an hour — but Kroger shutting down stores in Los Angeles contributes to another major issue: food deserts.
There are more liquor stores in South L.A. than grocery stores. pic.twitter.com/MDGe6MJn7G
— Los Angeles Times (@latimes) November 12, 2020
Food deserts are areas that have limited access to fresh food, and this disproportionately impacts minority and low-income communities within inner cities.
One might ask: Kroger is a big company — shouldn’t it make enough profit to increase wages for its employees?
Perhaps, but that does not tell the whole story about government-imposed pay raises.
President Joe Biden and many Democrats are looking to increase the federal minimum wage from $7.25 an hour incrementally to $15 an hour by 2025.
Even though the hike would be incremental, it would have devastating consequences on businesses.
Small businesses, along with larger businesses that have narrow profit margins — like grocery stores — would struggle greatly to keep up. We have already seen this happen with many mom-and-pop shops across the country.
In an economy still recovering from pandemic shutdowns, wage hikes from the government of any kind are sure to fail both workers and businesses.