How the fight over 'hero pay' for grocery workers reveals chain stores' massive corporate greed

• Paul Constant is a writer at Civic Ventures and a frequent cohost of the "Pitchfork Economics" podcast with Nick Hanauer and David Goldstein.
• In this week's column, Constant talks about the 'hero pay' raises some stores like Trader Joe's and Kroger adopted last year.
• Kroger later blamed this raise for store closures, despite paying out billions in profits to the company's shareholders.

Last March, when lockdowns began, grocery store workers and delivery drivers were rightfully hailed as heroes of the pandemic. Even as restaurants and bars closed to stop the spread of coronavirus, grocery store employees risked their health, and the health of their families, to keep Americans fed while white-collar workers transitioned to home offices. From the very beginning of the pandemic they put on homemade masks to stock shelves, ring up customers, and keep the supply chain working when everything else shut down.

At the beginning of the pandemic, public respect for grocery workers was overwhelming and unanimous

Rodney McMullen, the chairman and CEO of the Kroger chain of grocery stores, was effusive in his praise: "Our associates have displayed the true actions of a hero," McMullen wrote in a press release, acknowledging his staff for "working tirelessly on the frontlines to ensure everyone has access to affordable, fresh food and essentials during this national emergency."

McMullen backed up his words of support for the heroes on his staff with a bold policy: Kroger, the largest grocery chain in the nation and the second-largest retailer after Walmart, announced on March 31, 2020 that it would "provide all hourly frontline grocery, supply chain, manufacturing, pharmacy and call center associates with a Hero Bonus - a $2 premium above their standard base rate of pay, applied to hours worked March 29 through April 18."

Kroger's Hero Bonus pay program eventually ended in May, two months into the pandemic. But the pandemic has continued unabated, and grocery store workers continue to live with a very high risk of COVID-19 infection. A Kroger-owned Fred Meyer grocery store in Seattle had an outbreak infecting 10 workers in December, for example.

Although the risks for grocery workers are still very high, the hero talk has all but disappeared

And so has the hero pay: Kroger employees from around the country report on Indeed that baggers at Kroger grocery stores earn an average of $9.28 an hour, while cashiers report pay of $10.53. (Bear in mind, too, that those average wages are likely inflated due to cities like Seattle and New York City that embraced a $15 minimum wage .) According to nearly 37,000 employee reports, Indeed said, "Few people think they are paid fairly at Kroger Stores." In exchange for putting their health on the line for a full year in thankless public-facing jobs, many Kroger workers earn wages that don't even lift them above the poverty line.

This year, leaders began to demand that grocery stores pay their employees extra during the pandemic. Lawmakers in Long Beach and in Seattle, among other cities, passed a $4-per-hour hazard pay bonus for workers at large grocery store chains.

The laws brought some much-needed attention back to workers who have disappeared from the public consciousness, and that pressure seems to have worked: After Seattle's City Council approved hazard pay, grocery chain Trader Joe's responded by temporarily raising worker pay around the country by $4 an hour.

This is great economic news for everyone: not only are workers being rewarded for performing tasks that white-collar workers would never do, but those workers also have extra money in their pockets, which they'll spend in their communities - including at grocery stores.

How Kroger responded very differently than Trader Joe's

In both Long Beach and in Seattle, Kroger issued press releases announcing that they were closing two stores, blaming the hazard pay for the closures.

I suspect the situation in Long Beach is similar, but since I live in Seattle I can better speak to the closures here. The two QFC grocery stores that Kroger is closing in Seattle are small, underperforming stores in upscale, walkable neighborhoods that have other - most would argue superior - grocery options nearby. (The other thirteen QFC stores owned by Kroger in Seattle will remain open, as well as Kroger's three Fred Meyer stores inside Seattle city limits, where the hazard pay applies.)

And, at least one of the targeted Seattle QFC locations had already been slated for redevelopment in the near future. In other words, it seems likely that Kroger could be exploiting stores that were failing before the pandemic to make the point they really want made - if city councils elsewhere try to raise wages, Kroger will continue to hold their employees' lives and livelihoods hostage in order to keep wages low and profits sky-high.

Giant corporations love to use splashy intimidation tactics like this to create fear-inducing headlines which help to peel support away from worker protections. But make no mistake: Even though Kroger's press releases suggested that the grocery business relies on "razor-thin" profit margins, Kroger has been making a ridiculous amount of money during the pandemic.

Because people have been working and eating at home over the last year, Kroger has boasted of record-breaking profits. For the first two quarters of 2020, reports the Detroit Free Press, its net earnings nearly doubled "to more than $2.031 billion compared with $1.069 billion in the same period of 2019."

In the third quarter of 2020, Kroger announced operating profits of $792 million

And with grocery spending in Washington state up by double-digit percentages since the beginning of the pandemic, it seems highly unlikely that hazard pay is the tipping-point expense that forced Kroger to pull the plug on these stores.

And while Kroger isn't willing to pay the "heroes'' its leadership loves to praise in press releases, the corporation happily opened their wallets for shareholders this year, paying out a dividend of 18 cents per share.

Last year, Kroger said in a press release, "We have returned approximately $6.4 billion to shareholders via dividends and repurchased shares [also known as stock buybacks] since the beginning of fiscal 2017." As thanks for returning obscene profits to shareholders, CEO W. Rodney McMullen received $21 million in total compensation in 2019, an increase of 76% over the year before and 798 times the median annual Kroger employee salary that same year.

McMullen wasn't the only one who received hero pay a year before the pandemic, ExecPay noted: "In 2019, six Kroger executives received on average a compensation package of $8.7 million, a 46% increase compared to previous year."

While Kroger can find plenty of money for its CEO, its executive team, and its shareholders, the corporation picks up its toys and heads home when city lawmakers ask it to increase pay for the frontline workers who have been putting their lives on the line so that Kroger can boast about their unprecedented profits.

The math is clear: Kroger's coffers are more than full enough to reward its employees for their essential work in the midst of a global pandemic. McMullen and his executive team apparently prefer to keep that "hero pay" for themselves.