March 20, 2015 / 11:04 PM / 3 years ago

After Target wage hike, labor groups turn to drugstore chains

CHICAGO (Reuters) - Some labor groups looking to broaden their push for minimum wage hikes after success at big U.S. retailers including Target Corp, are preparing to take on drugstore chains.

People walk by a Walgreens store in Pasadena, California December 20, 2013. REUTERS/Mario Anzuoni

A source this week said Target (TGT.N) will raise its minimum wage to $9 per hour in April, matching moves by rivals Wal-Mart Stores Inc (WMT.N) and TJX Cos (TJX.N).

The retailers, which were targeted by labor advocates and their allies, are also facing tougher competition for employees as unemployment drops to its lowest level in more than six years.

Labor activists said the wage hikes by big retailers will give them greater leverage with drugstore operators, who make up one of the fastest-growing and most profitable areas in retail.

The United Food and Commercial Workers International (UFCW), a union which played a key role in pressuring Wal-Mart, said it will accelerate its efforts to organize Walgreens Boots Alliance Inc (WBA.O) workers to demand better pay.

Walgreens is the top U.S. drug retailer, followed by CVS Health Corp (CVS.N) and Rite Aid Corp (RAD.N).

“Given the current momentum, we expect a faster chance of success in hiking minimum wage within the retail space which includes drug chains, than say the fast food sector,” said Marc Goumbri, a spokesman for the UFCW.

Another labor group, The New York-New Jersey Joint Board of Workers United, an affiliate of the Service Employees International Union (SEIU), is planning to start wage negotiations this summer with the management of Duane Reade, a local subsidiary of Walgreens.

“What jumps out at me is that drugstores are not only reporting strong profits but expanding at a rapid pace and making multi-billion dollar acquisitions,” said the group’s President Julie Kelly.

“That puts them in a position to lead here and raise the wages they pay,” said Kelly. The recent moves by large retailers raises the chances of success, she added.

Kelly said her union has not decided on wage demands, although it broadly supports the $15 an hour “living wage” backed by labor groups nationwide.

Twelve percent of Walgreens employees earn less than $9 an hour, with a typical cashier earning about $8.60 per hour, compared to $8.70 per hour at CVS Health Corp, according to compensation analytics firm Payscale.com, which usually collects pay data from a sample of a company’s employees.

Walgreens spokesman Michael Polzin said the company meets or exceeds all wage ordinances and its pay scale varies as it seeks to remain competitive in local markets. He declined to comment on the prospect of wage hikes or the number of employees who earn less than $9.

Payscale data showed 10 percent of CVS employees’ hourly earnings and 16 percent of Rite Aid Corp workers’ are below $9.

CVS declined comment while Rite Aid did not respond to requests seeking comment.

A BETTER SHOT AT SUCCESS

Drugstores are a good target in part because of relatively high employee retention rates, which make organizing easier than in other sectors, including fast food, analysts say. Annual worker turnover at fast food chains is as high as 50-100 percent in some areas, they said. Some analysts last year put the turnover at drugstore chains as low as 11 percent.

With drugstores moving into 24 hour operations and employees demanding better benefits, the opportunity to organize the workforce has improved, said Burt Flickinger, managing director of retail consultancy Strategic Resource Group and a lecturer at Cornell University.

Flickinger said even regional drugstore operators like Fred’s Pharmacy, part of discount retailer Fred’s Inc (FRED.O), New York- and Vermont-based chain Kinney Drugs could see their workers organize and press for higher wages. Another target could be Florida-based Navarro Discount Pharmacies Inc, which was acquired by CVS last year, he said.

The companies did not respond to requests seeking comment.

“It will take 6-8 months for the results to start coming in,” he said. “But drugstores most certainly appear to be the ones next in line for a wage hike.”

Reporting by Nandita Bose in Chicago, editing by Peter Henderson and Christian Plumb

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