San Diego City Wire

It’s a concept that is growing: Governments mandating pay increases for frontline workers, such as grocery store employees, because of the COVID-19 pandemic. The unforeseen cost, however, could be serious, as some stores and grocery organizations are saying mandated pay hikes are hitting them hard, and causing stores to close.

The Los Angeles County Board of Supervisors voted 4-1 last week to give grocery and drugstore employees working at businesses in unincorporated areas of the county a $5 per hour pay increase for 120 days.

Kerry Jackson, a fellow at the Center for California Reform at the Pacific Research Institute, said government interference, no matter how well-meaning, can lead to disaster.

Jackson, the author of the book “Living in Fear in California,” is a former newspaper reporter and editor who has written numerous op-eds for media outlets. He also has studied the concept of “hero pay” and said it’s a bad idea that won’t help frontline workers.

They have been called “essential” workers, but Jackson said government-mandated additional compensation isn’t the answer to assisting them.

“It's not a legitimate function of government to help anyone. Every time public policy tries to help or favors someone, it harms or holds back someone else,” he told San Diego City Wire. “This is an issue the private sector should handle and in fact it has. Walmart, for instance, handed out nearly $3 billion to their employees in special bonuses last year.”

Jackson said when governments interfere with businesses, it can persuade the firms to look elsewhere. It’s why the best option is to allow the free market to operate without government help or hindrance.

“It surely makes anyone thinking about starting, relocating or expanding a business feel unwelcome, knowing that politicians can dictate their business operations,” he said.

Both Long Beach and Seattle mandated $4 an hour pay increases for frontline workers. In response, Kroger closed two grocery stores in both cities.

“The irreparable harm that will come to employees and local citizens is a direct result of the City of Long Beach’s attempt to pick winners and losers,” Kroger said in a statement.

The Long Beach City Council approved the pay increase in January. The California Grocers Association has mounted a legal challenge, saying both federal and state laws have been ignored. Meanwhile, workers in some stores say they feel caught in the middle of a political battle, with their jobs at risk.

Jackson said this could happen in other cities. Grocery stores operate on a thin profit margin, and boosting pay $4 an hour for scores of workers could tip a store into the red. As other states and cities contemplate such actions, they need to realize it could end up closing stores and putting people out of work, he said.

“I wouldn’t bet against it,” Jackson said.

U.S. Chamber of Commerce Senior Vice President of the Employment Policy Division Glenn Spencer said “hazard pay” or “hero pay” can cause unintended damage.

“It’s basically just an unfunded mandate,” Spencer told DC Business Daily. “Some of these businesses have particularly thin profit margins.”

He also said the idea that unions could consider rebates or reductions in dues were “interesting ideas” that need to be put on the table and discussed.

"I’m sure workers would appreciate that,” Spencer said.

Jackson agreed, but doubted it would become a reality.

“Unions are paid to protect their members and cutting or rebating dues would certainly qualify as help,” he said. “While I would like to see that happen, I wouldn't count on it.”