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Loblaw Makes Its Profits by Paying Workers Poverty Wages

For Canada’s third-richest family, the Westons, the pandemic has meant windfall profits. Now, workers at Loblaw-owned supermarket chain Real Canadian Superstore are threatening a strike for better pay and conditions.

On September 24, 97 percent of Alberta’s Real Canadian Superstore workers voted to strike.

Ten thousand Real Canadian Superstore workers across Canada’s westernmost prairie province, Alberta, appear poised to strike against pandemic pay cuts by Loblaw Companies Ltd. Even after Loblaw reported a banner year in profits and revenue, the company refuses to reinstate their $2 per hour “hero pay.”

This past summer, after over a year of rapid profits, Loblaw decided that its unionized Alberta Superstore workers were due for wage and hour cuts. Superstore’s August 2021 offer, posted on the United Food and Commercial Workers’ Local 401 website, would have cut the hours qualifying for “night premium pay” and cut guaranteed hours for staff. The union pushed for the company to reinstate the $2 per hour “hero pay” it cut last summer, but management refuses to budge.

On September 24, 97 percent of Alberta’s Superstore workers voted to strike. The company responded by retracting its main demand for hours cuts and offering an immediate wage increase of up to $0.90 per hour instead, plus an increase of as much as 1.5 percent in the first year of employment. This minor improvement is only about half the rate of the hourly pay it cut last spring. The latest struggle is yet another chapter in the company’s ongoing efforts to maximize the “flexibility” of its operations by busting unions, cutting wages, and gutting job security.

“The Well-Being of Our Colleagues Remains Our Top Priority. Be Well.”

The Superstore workers aren’t alone. After the hero pay was cut in late June 2020, it wasn’t restored for any of the company’s 220,000 workers as they faced resurgent waves of COVID-19 infections and deaths.

The cutback led to a strike by workers at Loblaw-owned Dominion grocery stores in Newfoundland. The strike lasted twelve weeks, persevering in the face of a heavy police presence and threats of arrest. The workers, unfortunately, only won a $0.35 increase in the first year.

In lieu of pay increase, all 220,000 workers received a note from the company’s scarf-enthusiast CEO, Galen Weston Jr, justifying the cut on the grounds that management was “confident our colleagues are operating safely and effectively in a new normal.” Lest he seem cold, Weston ended his letter by assuring the low-wage workers: “Your safety and the well-being of our colleagues remain our top priority. Be well.” To date, thirty of Alberta’s forty Superstore locations have reported COVID-19 outbreaks.

Immediately following the wage cut, Bloomberg reported, the company’s shares rose by 2 percent. One Desjardins Securities analyst called the cut “a slight positive for the industry as wages account for the majority of the pandemic-related costs.” Throughout 2020, according to the company’s most recent annual information form, Loblaw’s revenues grew to $52.7 billion. Loblaw reported a profit of nearly $400 million and raised its dividend by 3.2 percent. As of April of this year, Galen Weston Jr increased his own reported wealth, as part of Canada’s third-richest family, from $8.8 billion in March 2020 to $13.4 billion.

It may seem strange that an enterprise as large and as profitable as Loblaw Companies Ltd. is willing to provoke two strikes involving tens of thousands of workers in order to block a $2 pay increase. However, it is in keeping with management’s long-standing strategy of keeping workers’ expectations low.

The same month the company introduced its $2 pay cut, Weston coauthored a report for the Business Council of Canada entitled “We’ve Flattened The Curve, Now What?” The authors of the report complained about the money the federal government had spent supporting workers left unemployed by the effects of COVID-19. These supports, they argued, meant that “employees lack incentives to return.”

This complaint was not without precedent. Back in 2018, Loblaw rejected a credit union proposal to pay its workers a “living wage” — described in the proposal as “the income necessary to support families in specific communities.” Notably, the directors opposed the motion because it would “oversimplify” the ways in which Loblaw sets compensation “and restrict its competitive flexibility.”

This flexibility is dependent on a workforce desperate for poverty wages. That the paltry offerings of federal COVID-19 supports worked to interfere with the company’s modus operandi is a sad testimony to its business strategy of exploiting destitution and need.

Building an Empire Through Low Pay and Labor Discipline 

The scale of Loblaw’s enterprise is vast. Through its long history, it has grown its profits enormously by keeping wages low. Soon after its wartime expansion, the company was, Gerald Caplan notes, a prominent donor to the red-baiting Public Informational Association. The association waged a campaign to block both the Congress of Industrial Organizations (CIO) and the growing Co-operative Commonwealth Federation (CCF) and to prop up George Drew’s Tories.

Loblaw wasn’t able to stop the rise of CIO organizing, but by the mid-1950s, the company, by then the largest chain in Canada and headed by the “Barnum of Supermarkets,” had settled with a number of CIO union locals. Late ’90s president and McKinsey & Co alum Richard Currie explained company strategy through these decades as a “huge capital investment program” pumped “into large high-volume stores, where union costs were not quite so much a determinant of profitability.”

In his history of UFCW Local 401, Defying Expectations, Jason Forster writes about the ways that Loblaw co-opted organized labor in order to expand the scale of its operations. The company did this in part through a program of closures and consolidations. However, Loblaw sometimes voluntarily recognized unions in order to buy peace and hobble radical labor organizing. This strategy could last only so long as demand was high.

By the early 1990s, that consumer demand tapered off. “We had a problem,” wrote Currie, for the Ivey Business Journal. “Weak management had allowed the store asset base to erode and had provided fertile opportunities for labor unions.” In the ’90s, sales were slipping, and revenue was uneven.

In a period of “slow growth,” Currie argued: “Profit improvements in the 1990s are likely to come primarily from bottom-line cost reductions and lowered breakeven points rather than from the top-line sales and margin expansion strategies much more common in the 1970s and 1980s.” For workers, that meant cutbacks — or, in Currie’s words, stretching “variable costs.”

The company demanded major cuts to wages and job security, provoking four high-profile strikes across Ontario and Quebec. Undeterred, the company reported that the negotiations were a success and its return on investment rose far about the TSX average. When Currie resigned as CEO, he collected a $10 million payout and left behind a management team dedicated to his vision. Loblaw would continue to “reduce operating and labor costs in order to maintain earnings in light of lower prices and increased competition.”

Throughout this period, the company also proved an eager supporter of right-wing provincial attacks on unions, workers, and the poor. Galen Weston, the CEO of Loblaw’s parent company, donated over $34,000 to Mike Harris’s ultra-right-wing Ontario Tory campaign. Harris also named Galen’s wife, Hilary Weston, Ontario’s lieutenant governor.

Poverty Wage Profits: The Long Game

In 2006, Galen Weston Jr took over as CEO in advance of, as Maclean’s noted, “an imminent strike by unionized workers in Ontario.” A last-minute agreement averted the strike, which was prompted by management’s attempt to reclassify stores in an effort to cut wages and benefits. In 2010, 1,700 workers in Sarnia, Chatham, and Windsor were moved to strike against company cuts of up to 25 percent to wages and benefits. At the time, Loblaw’s public relations vice president justified the cuts by saying it would help the company obtain “operational flexibility.”

Ultimately, the deal that averted that strike also froze the wages of part-time employees. In each successive annual report since then, the company has spelled out for its shareholders that it is “willing to accept the short-term costs of labor disruption in order to achieve competitive labor costs for the longer term.” This admission casts all Loblaw labor disputes in a different light — Loblaw expects strikes and factors arm-wrestling at the bargaining table into their long-term business strategies.

In 2013, the company provoked strikes at its Real Canadian Superstores in Alberta. As the Alberta Federation of Labour notes, the company’s demands for hours reductions and a 40 percent pay cut for new hires spurred a 97 percent vote in support of industrial action and a subsequent three-day province-wide strike. In the end, the 8,500 Alberta workers won some small wage increases for full- and part-time staff and improvements in health and benefit coverage.

In 2014, the company purchased Shoppers Drug Mart for $12.4 billion. In the aftermath of the sale, the Globe and Mail reported, management campaigned against an effort to automatically certify Shoppers outlets in Manitoba with its existing unionized grocery stores.

Loblaws operates an internal monitor system for potential union drives at its non-union stores. It is part of the company’s comprehensive anti-labor grand design. What better way to lower the cost of labor then to never allow it to rise in the first place?

Loblaw has recently explored the possibility of an automated fulfillment order system. It has been clear that it doesn’t intend to create unionized jobs in the process. During an earnings call, the company’s president told one analyst that “from a union perspective, we wouldn’t see that.”

In 2017, Weston Jr, playing to type on a conference call, asserted that Ontario’s increased minimum wage was an “aggressive” financial “headwind.” Loblaw claims to have a “good relationship” with the unions representing its workers, but for decades, the company has worked to undermine organized labor in the name of “flexibility.”

Any gains workers win in pay, benefits, or improved job security today will become the basis for the bargaining power they’ll have tomorrow. This will, in turn, empower them to stand up to management’s demands for cuts.

Loblaw is able to guarantee its profits by continually suppressing the demands of its workers — this is the source of the Weston family’s wealth in Alberta and everywhere else in Canada. Workers employed by the Loblaw empire in other parts of the country should take note of this latest strike effort. If workers can win in Alberta, they win across the rest of Canada, too.