Correspondence - #30 - Laserfiche WebLink

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Consumer and Community Impacts of Hazard Pay Mandates Executive Summary Hazard -pay mandates passed in the City of Long Beach and under consideration in the City of Los Angeles and in other local jurisdictions would raise pay for grocery workers by as much as $5.00 per hour. Since the average pay for grocery workers in California is currently about $18.00 per hour, a $5.00 increase would raise store labor costs by 28 percent, and have major negative impacts on grocery stores, their employees and their customers. Specifically: Average profit margins in the grocery industry were 1.4% in 2019, with a significant number of stores operating with net losses. While profits increased temporarily to 2.2% during early to mid 2020, quarterly data indicates that profit margins were subsiding to historical levels as 2020 drew to a close. Wage -related labor expenses account for about 16 percent of total sales in the grocery industry. As a result, a 28 percent increase in wages would boost overall costs 4.5 percent under the City of Los Angeles proposal of $5.00 per hour. This increase would be twice the size of the 2020 industry profit margin and three times historical grocery profit margins. In order to survive such an increase, grocers would need to raise prices to consumers and/or find substantial offsetting cuts to their controllable operating expenses, which would mean workforce reductions. As an illustration of the potential magnitude of each of these impacts, we considered two extremes: 1) All of the higher wage costs (assuming the $5.00/hour proposal) are passed through to consumers in the form of higher retail prices: • This would result in a $400 per year increase in grocery costs for a typical family of four, an increase of 4.5 percent. • If implemented in the City of Los Angeles, its residents would pay $450 million more for groceries over a year. • The increase would hit low- and moderate -income families hard, particularly those struggling with job losses and income reductions due to COVID-19. • If implemented statewide, additional grocery costs would be $4.5 billion per year in California. 2) Retail prices to consumers are not raised and all the additional costs are offset through a reduction in store expenses: • Given that labor costs are by far the largest controllable expense for stores, it is highly likely that the wage mandates will translate into fewer store hours, fewer employee hours, and fewer jobs. ➢ For a store with 50 full-time equivalent employees, it would take a reduction of 11 employees to offset the increased wage costs, or a 22% decrease in staff. ➢ If the mandate were imposed statewide at $5.00 per hour, the job loss would be 66,000 workers. 0