By Derek Hosford, American Consumer Institute
The U.S. Department of Agriculture (USDA) says there are 13.7 million Americans with limited access to healthful and affordable food – a severe problem that is being exacerbated by legislative and regulatory policies that are raising consumer prices and increasing labor costs forcing some grocery stores to close their doors for good.
Government regulations that require wage premiums for grocery store employees during the COVID pandemic, also referred to as hero pay, are sweeping the west coast and making the problem of so called food deserts in many cities worse, particularly in California.
Food deserts are areas that lack grocery stores selling affordable and fresh produce and other healthy foods to consumers. This often leads to food insecurity, especially in areas such as South Los Angeles. While this is a problem for many Los Angeles residents, it also affects other regions such as West Oakland. Since healthy food options are already hard to come by in these areas, ‘hero pay’ only makes the issue of food insecurity worse.
‘Hero Pay’ mandates intensify the food desert problem in these communities with a low supply of grocery stores. Grocery chains already shy away from these areas due to their low-incomes and high crime rates which make opening a store much less likely to generate profit. Wage premiums make earning profit even less possible for these stores, often resulting in store closures and higher prices imposed on consumers.
After Long Beach and Seattle passed similar wage premiums, the cities both saw two Kroger owned stores close due to the new ordinance, and Los Angeles and Oakland could see a similar fate. According to the California Grocers Association, between one-sixth and one-third of their stores reported negative profits in a recent analysis of the new ordinance in Los Angeles.
The analysis also found that a $5 wage premium could potentially result in higher prices for consumers in these poorer areas, with a typical family of four paying $132 more for groceries during the 120 days the ordinance will be in effect. New wage mandates should not be placing more financial burden on people who are already not financially stable due to the pandemic.
While food insecurity was prevalent for a while in these areas, recent wildfires and the pandemic have only exacerbated the food deserts in California. These events have resulted in more people becoming food insecure, primarily those in poorer areas.
A study by the National Bureau of Economic Research found that areas with a median income of $25,000 or less are much more likely to be located in food deserts than those with higher median incomes. African American and Hispanic households are also more likely to be in food deserts than white households, according to the US Department of Agriculture. These facts are especially true for many parts of California, which continues to have the highest rate of poverty of any state in the United States.
In West Oakland, for example, where a $5 per hour wage premium for grocery store employees was recently passed by the city council, 36% of residents live below the poverty line and many neighborhoods do not have a single grocery store. In South Los Angeles, where the average income is much lower than the other parts of the city, there are more liquor stores than grocery stores.
Lack of access to produce forces residents in these areas to rely on convenience stores and fast-food chains, which only offer junk foods that contribute to a higher rate of obesity, diabetes, and other weight related health problems.
‘Hero pay’ mandates, although designed to protect those at lower incomes, do not benefit people, as the state of California demonstrates.
While increasing food prices, these new rules will only exacerbate the issue of food deserts for 24 million Americans by leading more grocery stores to close and leaving more people without access to food options.
Derek Hosford is a policy analyst at the American Consumer Institute, a nonprofit educational and research organization. For more information about the institute visit www.TheAmericanConsumer.org or follow us on Twitter @ConsumerPal.