CA: Analysis: Stores are winners in strike settlement

Never mind the individual losses to union members, who struggled along on paltry strike pay, especially after strike funds were bled nearly dry and maximum weekly checks were cut back to $100. Strikers were forced to pay for their own health benefits at the beginning of the year, and some were forced out of homes by lack of income, or gave up the fight in order to take other jobs and pay their bills.

The real loss will become evident in the next couple of years, as turnover in the industry, often cited as being about 15 percent annually, leads to the rapid replacement of workers with fresh faces hired after the ratification.

All along, the two sides saw different goals as the central issue. For workers, it was maintenance of health care benefits, which they "kind-of" achieved. For the chains, the core argument was about a two-tier system that allows them to put new hires on a different wage scale and benefit package.

The health benefit issue that bubbled quickly to the top was whether employees would be forced to pay premiums for their health care.

They don't really have health insurance in the form familiar to most workers. Instead of an insurance policy issued or managed by a traditional insurance companies, their health care costs are paid out of a fund managed by a team of trustees, some of whom are appointed by the chains and some by the union. The supermarkets pay into that fund a contractual amount of money for each hour worked by their UFCW employees. The proposal that workers pay premiums was actually a proposal they ante up a portion of the money paid into the fund.

The amount they now have to pay is set by capping the supermarkets' contribution, and the employees' contributions will be whatever was needed to keep the fund afloat, estimated by the supermarkets during negotiations to be $5 per week for individuals and $15 per week for families.

Meanwhile, the supermarkets' real goal was the two-tier system that allows them to pay fewer dollars for new employees, not only in wages but also in the amount to be contributed to benefits. To get a sense of the dollars involved, by the end of the new contract, if the turnover rate is 15 percent per year, each week the three supermarkets will be saving $3.5 million under the terms of the settlement ---- two thirds of it attributable to reduced health care fund contributions.

It's hardly surprising that the settlement seems to achieve the goals set by both sides. That was the goal of mediator Peter J. Hurtgen and was arrived at through a technique that he said focuses on that exact outcome.

"There are a lot of techniques we use in mediation," Hurtgen said. "We use active listening to get into their reasoning and to let them know that we understand them. We look for their concentric circles that they share, their common ground. That's difficult because they often want to concentrate on their differences rather than on what they share."

What Hurtgen achieved was, in part, a result of the growing weakness of the union that depended mostly on its ability to economically injure its adversary in a corporate world grown so ubiquitous and so powerful that hemorrhaging income in Southern California could be tolerated because of the companies' huge revenues in other parts of the country.

The union delivered on its promise to its members that it would stand its ground on their fully company-paid health benefit, at least for the next 24 months. After that is a maybe. But to achieve that goal, it had to give in on the two-tier proposal, and in its details is where the devil is to be found.

For one thing, the union has, in effect, sold out its next generation of membership. The second tier workers will become members of the UFCW, but they will be second-class members, workers who get less pay for the same work, who take years longer to climb the wage ladder, and who will be covered by a benefits package that will cost them more to use and for which they must work much longer to qualify.

Also losing are pensioners whose health insurance also becomes costlier.

In fact, even though they will pay no premiums for at least two years, current employees will find their health care costs going up thanks to a doubling or more-than-doubling of the co-pay provisions.

And, in time, the supermarkets will have more workers in the second tier than in the first, and with that will come an incentive to push the old hands out the door, further cutting costs by exaggerating the rate at which average pay and benefit costs tumble.

For a couple of years the incentive is minimized, because the supermarkets must pay the same health benefit contribution for all hours worked by all UFCW employees, new and old alike: $3.80. But after that, for pre-settlement employees the contribution will jump to $4.60, while for post-settlement workers it will drop to just $1.10.

The same fund will cover both groups of employees, which means that the average income to the fund per employee covered will slide, and all will have to chip in more.

Meanwhile, the supermarkets must now find the path home and regain the market share lost during the strike. It needn't have been the way it was, except that the corporate giants and the union saw an opportunity to settle the issue of who would dictate the terms of their joint future.

Unheralded, and mostly unnoticed, Costco ---- one of the competitors the supermarkets singled out as a threat to their future if they failed to get concessions from the UFCW ---- reached an accord last week with the United Brotherhood of Teamsters, the union that represents Costco employees.

Costco employees agreed to reduce the company's contribution to their health benefit. But they gained wage concessions that more than offset the health care losses. And they did it without losing pay in the process, because there was no strike at Costco.

Costco benefited in turn because during the grocery strike it gained market share that it may never have to give back to the big three.

What about Wal-Mart, the bogeyman that the supermarkets said was their real cause for concern? Like most hobgoblins, it's best dealt with after it appears, when the nature of that struggle reveals itself.

Wal-Mart is not, typically, a major player in the urban marketplaces where Safeway, Kroger and Albertson's make most of their money. And if that dogfight does develop, consumers are likely to praise their familiar stores when they finally drop prices to compete.

Contact staff writer Edmond Jacoby at (760) 739-6675 or ejacoby@nctimes.com.