Local Kroger Stores Close as California ‘Hero Pay’ Ordinance Backfires
Ralphs and Food 4 Less, both owned by the parent company Kroger, announced Monday that they will be closing 25 percent of their stores in Long Beach following the city's "Hero Pay" ordinance."The irreparable harm that will come to employees and local citizens as a direct result of the City of Long Beach’s attempt to pick winners and losers, is deeply unfortunate," a company spokesperson said.
As long as the people of California keep electing economic illiterates, horrible things like this will keep happening. The city council of Long Beach apparently feels that it has a right to decide how businesses making a profit choose to use that profit. However, by raising employee wages by $4 hour, it is apparently cheaper for Kroger to close a couple of stores so the end result is more unemployment. Way to go city of Long Beach.
Even if you accept the premise that a city council is justified in dictating how a business uses its profits, there are still fundamental economic laws here. So lets do some quick math...
Kroger closed 2 stores which represents 25% of the total so presumably they have 8 stores in Long Beach. Closing two stores must have brought the number of employees down below 300 in order to avoid the $4 increase in wages. So to keep things simple, lets say each store has about 50 employees. How much would a $4 increase per hour increase total costs? So I'm just going to make some rough estimates here and say those 400 employees work 20 hrs/week 48 weeks/year on average. I think that is a very conservative number. 400 employees x 20 hours x 48 weeks/year x $4 increase = $1,536,000 per year. That seems like it could be a stiff amount for 8 stores to absorb, especially when these particular stores are supposedly not doing so great financially anyway.
It makes zero sense for a business that wants to stay in business to operate stores at a loss. If Kroger was not going to lose money by keeping those stores open then they would have kept them open. That COVID exists doesn't change any of this.