The Westons could have changed workers’ lives, but would rather government do it

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Galen G. Weston, one of the world’s richest people, thinks common folk should be paid more.

“I continue to be a strong believer in a progressive minimum wage and would support any government-led effort to establish a living wage,” Weston said in a letter to customers about the COVID-19 crisis on June 11.

I’m sure advocates of a universal basic income were thrilled to gain such a powerful backer, one who leads the company that owns the country’s biggest grocery and pharmacy chains. Still, it was a rather weak declaration of support for the working poor, since few would be better placed than Weston to lead a charge for higher wages.

His family’s fortune of about US$8 billion was No. 222 on the Bloomberg Billionaires Index as of June 18. A big source of that wealth, Loblaw Cos. Ltd., employs some 200,000 people, the majority of them in mid- to low-level jobs such as running cash registers and moving crates in warehouses.

Canada’s grocery oligopoly has been fighting amongst itself for market share in recent years, so Loblaw’s growth has been muted. Still, the parent company, George Weston Ltd., generated a combined profit of more than $700 million in 2018 and 2019. That means there’s room on the balance sheet for some labour-related liabilities. The Weston family owns a majority of the company’s equity, according to Bloomberg, so they needn’t worry about a shareholder revolt.

As the biggest member of the grocery oligopoly, Loblaw probably could force the other two — Stellarton, N.S.-based Empire Co. Ltd., which runs the Sobeys and Safeway chains, and Montreal-based Metro Inc. — to raise their wage rates if it acted first. Oligopolies tend to be led by a de facto leader, while the others follow.

Something like that happened on March 21, when Loblaw and Metro each raised the hourly rate of their frontline workers by $2, retroactive to March 8. Empire matched the next day with its own “Hero Pay” program.

All three described the increases as temporary, but there was reason to think the bonuses might stick. Pay rates tend to adjust very slowly, one of the reasons that wages and salaries have declined to the equivalent of about 44 per cent of gross domestic product from around 50 per cent in the 1970s and early 1980s, according to Statistics Canada data.

Shoppers line up in front of Loblaws, separated in rows by stacked wooden pallets at the Leslie Street store in Toronto.

Veronica Henri/Postmedia Network

For a moment, the coronavirus crisis looked like it might force employers, and maybe even society at large, to reconsider the value of “unskilled” labour.

The grocers quickly learned that their meagre pay packages might cost them an opportunity to reap windfall profits, as the lockdowns brought a surge in demand for food and household goods to go along with the sudden danger.

The economic forces at work were so strong that they even moved Walmart Inc., the retail behemoth notorious for its commitment to cost containment. On March 24, Walmart’s Canadian unit said it would be adding a “thank you premium” of $2 per hour to the wages of its “associates,” effective April 3 to April 30.

“There are so many associates stepping up to provide an essential service in these times of need,” Horacio Barbeito, the head of Walmart’s Canadian operations, said in an open letter on April 6.

Barbeito’s relatively miserly bonus scheme arguably presented the Canadian grocery giants with an opportunity since they kept their bonuses in place after April 30.

Walmart also announced plans to hire 10,000 people to keep up with the surging demand brought by the lockdowns, just as the big Canadian grocers were scrambling to find thousands of new workers of their own.

An aggressive recruitment campaign might even have used patriotism to its advantage against Walmart

It could have been a moment to squeeze Walmart by outbidding the American company for local talent. An aggressive recruitment campaign might even have used patriotism to its advantage, given the anxiety of the times: Canadians need to look out for each other, not go to work for a company based in Arkansas.

Alas, oligopolists don’t think like that. Because they divide up a market between themselves, they are oblivious to many of the economic forces that cause the rest of us to do the things we do. Sure, there’s some “competition” at the margins, which causes the occasional price war to erupt. But the main goal is preservation of the status quo.

Wages are sticky, in part, because they almost never come down, even during recessions, so employers have an incentive to avoid raising them when times are good.

But that theory assumes a competitive labour market. Collective agreements put upward pressure on wages, but so does churn, which is the word economists use to describe job shifting. Workers tend not to go through the trouble of changing employers in return for less pay. Last year, with the jobless rate at a level consistent with full employment, the Bank of Canada observed that the churn rate had gone up. It was no coincidence that hourly wages were rising at an annual pace of about four per cent, the fastest in years.

Loblaw, Empire and Metro don’t operate in a purely competitive market. They felt no pressure to keep their wage increases in place. Instead, just as they raised them at the same time, and extended them at roughly the same time, they ended their COVID-19 bonuses at the same time.

“We have invested far more in our colleagues and customers during the pandemic than we have earned in extra sales, and our investment in safety and sanitization will continue,” an unnamed person at Loblaw who answers journalists’ questions said in an email. “This is not about putting profit before people.”

If you say so, anonymous email person. In Ottawa, members of Parliament aren’t shy about expressing their displeasure with the grocers cutting wages at the same time. Weston said he wanted politicians to lead the effort to establish a living wage. They might start by tearing down the oligopoly that made his family rich.

Financial Post

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