The Right Choice for Giant Eagle and Western Pennsylvania

Diana Polson
Stephen Herzenberg
Publication Date: 
February 28, 2018

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Executive Summary

Giant Eagle, established more than 80 years ago and the market-share leader in the Pittsburgh region grocery industry, was once a company that provided middle-class careers to its frontline employees. Built by five local families in 1931 and still owned by the descendants of these families, Giant Eagle has since expanded beyond Southwestern Pennsylvania into Northwestern Pennsylvania, Ohio, Maryland, West Virginia and Indiana. Today Giant Eagle also owns the GetGo fuel stations, Market District stores and Giant Eagle Express stores. 

Giant Eagle touts itself as a good corporate citizen – a family owned business that is rooted in and cares for the communities it serves. And to be sure, Giant Eagle does provide important charity to the Pittsburgh region and beyond. But in its primary role as an employer of 32,000 employees across multiple states, it falls short of this label. Company-wide each year, the reduction in worker pay today because of wage cuts since the late 1970s is many times greater than the company’s charitable contributions.

An anchor of the community. Prior to the 1980s, Giant Eagle provided family-sustaining careers to its employees. Workers at the company for more than 40 years describe how positions within Giant Eagle were much sought-after in the 1960s and 1970s. Workers felt known and respected by the owners and by managers. 

A shift to the low road. But in the early 1980s, things changed.

  • Giant Eagle began franchising stores that remained non-union.
  • In the first half of the 1980s, Giant Eagle slashed real wages in half or more – to about $8 per hour for newly hired stock clerks, cashiers, wrappers and deli clerks, and to about $15 per hour for meat cutters previously paid nearly $30 per hour. (All wages are expressed in inflation-adjusted 2016 dollars.) The wages lost in these years have not been restored since. 
  • Giant Eagle starting wages went from near or above the Pennsylvania median wage in 1979 to 43% and 62% below it in 2017. In a country and state in which wages for all workers have been stagnant since 1979, the relative collapse of Giant Eagle’s wages is stunning.
  • The company created “multiple tier” compensation, with less generous health benefits and pensions for new workers as well as lower wages. Today, multiple tiers still make it difficult for new employees to ever reach the higher wage rates that older employees enjoy.
  • Giant Eagle also increased its reliance on part-time workers with lower wage rates. Part-timers today account for 62% of Giant Eagle’s workforce, compared to 50% of all grocery store workers in Pennsylvania. 

The ratcheting down of Giant Eagle’s family sustaining wages mirrored development in the regional and national manufacturing sector, but from lower initial (1970s) wage levels. In the grocery industry, given the inherently local nature of grocery jobs, this downward mobility happened because of labor market dynamics within western Pennsylvania, not because of any need to compete with lower-wage states or countries. And within Western Pennsylvania, Giant Eagle, as the dominant regional grocery chain, spearheaded the transformation of jobs from middle-class to poverty-wage. 

A forthcoming report will discuss another disturbing aspect of this transformation: Giant Eagle’s mounting interference with workers’ rights to organize a union in facilities without union representation. The report will examine unfair labor practice cases that have arisen under the National Labor Relations Act in recent years and months. It will also evaluate Giant Eagle’s attacks on workers’ rights to form a union against international human rights standards and religious principles and teaching. 

Taxpayer-subsidized jobs. Workers are not the only ones who pay a price for Giant Eagles’ low wages. Taxpayers also pay because many Giant Eagle workers qualify for and rely on public assistance to make ends meet. In September 2017:

  • Over 3,500 (3,605) Giant Eagle workers in Pennsylvania were receiving Medicaid and/or food assistance (through the Supplemental Nutrition Assistance Program (SNAP)) benefits, at least a fifth of Giant Eagle’s Pennsylvania workforce and a larger share of the hourly represented workforce; 
  • Among grocery store chains and discount chains that sell groceries, Giant Eagle had the third-most Pennsylvania employees on these two public assistance programs. 
  • Giant Eagle has 40 times as many Pennsylvania employees on these two public assistance programs as does Costco.

In October 2017, almost half (46%) of Giant Eagle workers, and two thirds (65%) of part-time workers, earned a “poverty wage,” defined as a wage too low to reach the poverty level for a family of four even if the person works full-time, full-year (2080 hours). Moreover, while no workers hired before June 24, 2007 earned a poverty wage, 72% of those hired since that date did. This stark contrast drives home the solution to the poverty-wage problem at Giant Eagle: to reduce the share of its workers that earn too little to support their family, the company needs to significantly lift wages for less senior workers.

The company can afford to pay more. Over the past 35 years, Giant Eagle has grown enormously. It now ranks 31st on Forbes magazine’s list of “America’s Largest Private Companies” list, with annual revenues of $9.3 billion. It is the dominant grocery chain in the Pittsburgh metropolitan area with a 37.4% market share (counting its GetGo stores), more than the next three companies combined (Walmart/Sam’s Club, Aldi, and Costco). It also has a healthy market share in Cleveland and Columbus, Ohio, and in Erie Pennsylvania. Over the past three years based on staffing levels at most of its Pittsburgh-area stores, it appears to have increased productivity (sales) per hour of its hourly workforce by 20% to 25%. Moreover, the company and its owners just received a tax cut as a result of the new federal tax law that likely amounts to tens of millions of dollars.

A low-road path has long-term risks for Giant Eagle. While it appears highly profitable currently, the company’s current trajectory brings long-term risks. 

  • The company’s market share in the Pittsburgh region has fallen from its peak of 43%. 
  • Walmart/Sam’s Club has nearly a quarter of the regional market.
  • Three companies that offer low cost and/or good service have increased market share by six percentage points since 2010 (Aldi, Trader Joe’s and Whole Foods). 
  • And Amazon recently bought Whole Foods. 

Customer and worker ratings of the company also spell trouble.

  • Public ratings of Giant Eagle customer service rank it near the bottom of the industry, as indicated by the company’s appearance on lists such as “The 15 worst supermarkets in America” and “10 Retailers with the Worst Customer Service.” 
  • On-line ratings by employees rate the company near the bottom among grocery chains as a place to work, closer to Walmart than to Costco and Trader Joe’s. 

In addition, the company’s few remaining middle-wage workers – with decades of experience and institutional memory, and deep commitment to the company – will soon retire.

Long-term employees remember that “…back in the day, Giant Eagle service and products were far beyond anyone else’s” but now “…it’s as if they are trying to ruin their own business…” Says another worker, great customer service is “completely gone.”

A shift back to the high road. While many U.S. retail food chains have embraced a low-wage model, the well-documented examples of Costco and Trader Joe’s – and Target’s announcement last year that it will lift pay for all workers to at least $15 per hour – demonstrate the viability of a higher-wage model. 

Today, Giant Eagle as the market leader retains the ability to shape the future of the Pittsburgh regional grocery industry through the strategic choices it makes. It can pay better wages and flourish by doing so in a smart way that also improves customer service.

Giant Eagle has the potential to be a model of 21st century corporate responsibility for its home region and an architect with its employees of a “Just Pittsburgh” and a “Just Western Pennsylvania.”2 It isn’t a Walmart, with far-flung owners with no ties to the community. Giant Eagle is rooted in Western Pennsylvania and has done positive things for the region. The company’s deep Pittsburgh roots gives it even more reason, and responsibility, for helping the region build shared prosperity. 

Giant Eagle workers and their union have made clear to the company for the past four years that they want to partner on a relationship that works for the company as well as for workers and their families. In a country and a home town that believes in second chances, we believe customers would shop more at Giant Eagle if they saw the company seeking to restore its reputation with customers, workers, and the community.

To start Giant Eagle’s shift to the high road, we urge the company to use some of its $9.3 billion in revenues to restore its lowest and entry-level pay to wages approaching those of 40 years ago – $15 per hour – and to pledge to honor its workers’ basic freedom to organize and bargain collectively. 

We estimate that lifting wages statewide in the Pennsylvania grocery industry to $15 per hour would raise wages for about 100,000 workers and put $861 million in the pockets of working families. 

In Allegheny County – where Giant Eagle most clearly has the market power to make this an industry wide standard – a $15 per hour minimum wage would benefit 7,412 workers and lift wages for hard-working grocery workers by $103 million. These increases would amount to only 3.5% of grocery sales (less than that at Giant Eagle) – even before considering productivity impacts – one quarter of the impact of a $15 per hour minimum wage in fast food.

An investment in the dignity of Giant Eagle’s workforce would signal to communities in Pittsburgh and beyond that the company really stands behind its mission statement that “Together, we improve people’s everyday lives and well-being.”

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