This is Dominic Pino filling in for Jim Geraghty, who’s out this week. You’ll get Noah Rothman tomorrow through Thursday, but I’ll be back on Friday, so be nice to Noah in the meantime.
On the menu today: A tentative labor agreement for West Coast ports, and what’s going on with those UPS negotiations.
Let’s Make a Deal
After 13 months of negotiations, the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) have made a tentative agreement for a new labor contract for America’s West Coast ports. The uncertainty surrounding negotiations has spooked shippers, leading more of them to route freight to other ports on the East and Gulf Coasts rather than America’s busiest ports at Los Angeles and Long Beach.
The new contract is for six years and covers all 29 West Coast ports. The agreement, if approved, will be retroactive to July 1, 2022, the date that the previous contract expired. There was some talk earlier in negotiations that the ILWU only wanted a two-year contract. It’s a good thing a six-year contract was agreed to instead. A two-year contract, retroactive to last year, would have put the sides back at the bargaining table again starting in just a few months, doing little to resolve the uncertainty that has been hanging over the ports.
The Journal of Commerce reports that the ILWU scored a 32 percent increase in wages over the six years of the contract. In addition to that, the ILWU got a $70 million bonus for working through the pandemic, which will be split equally among the approximately 22,000 members covered by the deal.
The JOC says that the deal did not include some of the provisions related to manning requirements at Los Angeles and Long Beach that the ILWU had wanted. The PMA met with the ILWU in late April to discuss manning requirements at nonautomated terminals. Automation is always a key issue in negotiations, and West Coast port efficiency lags far behind efficiency in other countries, partly due to the ILWU’s power in resisting automation.
The union appears to have traded stricter manning requirements for the hefty wage increase and bonus. Despite opposition to automation that has resulted in some of the least efficient ports in the world, the ILWU’s membership has still declined significantly over the past few decades. The workers who are left are paid extraordinarily well, in many cases making $200,000 or more per year, with excellent benefits and significant political power with state and local politicians.
The disruption tactics the ILWU has been using over the past few months to gain leverage in negotiations appear to have hurt its own members this year, with paid work hours down 25 percent through April 14 compared to the same period last year. That’s partly due to shippers choosing other ports and partly due to dockworkers working less on union orders. Common work actions include assigning fewer workers and slowing down the pace of work. The JOC said that cranes at the port of Seattle–Tacoma went from 25 container moves per hour to fewer than ten.
As Peter Tirschwell argued on June 6 in the Wall Street Journal, by delaying negotiations for as long as it did, the ILWU might have missed an opportunity for a bigger pay raise. Ocean carriers earned extraordinary profits due to soaring container rates in 2021 and 2022, but those rates came back down to Earth at the end of last year and are largely back to normal now. And the constant uncertainty every time a West Coast contract expires contrasts with the relative ease with which the International Longshoremen’s Association, which represents East Coast dockworkers, has come to contract agreements for decades. The delay-and-prolong approach of the ILWU helps encourage shippers to go elsewhere, leaving less demand for longshore labor on the West Coast.
News reports have made a big deal of Julie Su’s involvement in the tentative agreement, in her current role as acting secretary of labor. She has held that position since the previous secretary of labor, Marty Walsh, left the position in March, and she is currently President Biden’s nominee for the full-time job. Her nomination has stalled in the Senate, with critics pointing to her inexperience with high-level negotiations as one of the areas of concern.
Various industry groups have been begging for federal involvement for months to help prevent a strike. Su met with the parties for the first time in person last Monday in San Francisco, with the tentative agreement being announced Wednesday. Both sides have praised Su’s involvement, but three days of her presence is unlikely to have been crucial to closing a 13-month negotiation.
Regardless, inexperience with high-level negotiations was never the only area of concern with Su’s nomination. As NR editorialized in March, as California’s labor secretary, Su demonstrated incompetence leading a large government agency, with billions in pandemic assistance being paid to fraudsters and eligible workers being put on waiting lists. And the U.S. should not nationalize California’s labor policies, especially A.B. 5, which Su oversaw.
A tentative agreement is not a sure thing, as the U.S. learned last year when a tentative agreement in the railroad industry was not approved by some of the rail unions, leading to congressional intervention under the Railway Labor Act to prevent a nationwide work stoppage. Dockworkers are governed by the National Labor Relations Act, which does not have provisions for congressional intervention, and unlike railroads, there are not twelve different dockworkers’ unions that have to separately approve the tentative deal.
Approval for this deal will likely take about three months, according to the JOC. There are local contracts within each region in addition to the coastwide contract. The local contracts will be approved first, then a vote of all ILWU members will be scheduled for the coastwide contract. There are 70 employers in the PMA, and they will also meet to approve the deal. The president of the West Coast’s largest terminal operator said he is “almost 100% certain” that the deal will be approved by both sides, the JOC said.
As usual, the ILWU has gotten what it wants: a significant pay raise with little progress toward further automation. By lowering the expectations for negotiations so far that simply avoiding a strike is considered a success, the ILWU manages to forestall any significant changes that might allow for U.S. ports to catch up to those in developing countries, let alone other developed ones. In the World Bank’s 2022 Container Port Performance Index, Los Angeles ranked 336th and Long Beach ranked 346th out of the 348 ports in the index. Both were behind Dar Es Salaam, Tanzania, and Beirut, Lebanon. U.S. ports should be leading the world, but as an interim goal, our ports on San Pedro Bay should at least strive to rank ahead of the port of San Pedro, Ivory Coast (ranked 300th).
What Will Brown Do for You?
Last time I filled in for Jim, I wrote about the possible Teamsters strike this summer at UPS. For a fuller explanation of what’s at stake there, read the April 6 Jolt here.
Negotiations began on May 10, and the current contract expires on July 31. On Friday, UPS Teamsters members voted to approve a strike, with 97 percent of those who voted approving one. A strike-approval vote is a necessary but not sufficient condition for a strike to occur. Strike approvals are often used as bargaining chips to reach a deal and are not actually acted upon.
The two sides had reached a deal last week on one of the issues the Teamsters had said was a priority: heat. “Package cars will have a cab fan retrofitted within 30 days of contract ratification,” UPS said. “We’ll install a second fan in vehicles without air conditioning by June 1, 2024.” The Teamsters still want to eliminate a category of driver that was created in the 2018 UPS contract, according to the New York Times. That was supposed to be a flexible position to allow part-time drivers to work for the company, but the Teamsters say UPS is abusing it to pay drivers less.
Two things contrary to appearances are important to remember about UPS. First, the Teamsters represent many non-driver employees at UPS, so issues that focus on driver conditions, such as air-conditioning, that grab media attention are not as important as they might seem to the overall contract. The big issues in any contract negotiations, such as wages, benefits, and scheduling, still need to be resolved, and those issues will matter a lot for warehouse workers in addition to drivers.
Second, UPS’s meat-and-potatoes is business-to-business shipping, not the consumer shipping that most of us see. That means a strike would likely affect consumer shipping first, as the remaining manpower would be focused on keeping business-to-business operations running.
One top industry consultant told the JOC that he believes the sides will have a handshake deal by the Fourth of July, and no strike will occur. The media continue to drool over the possibility of a strike. Teamsters president Sean O’Brien has continued his combative rhetoric, earning a glossy Washington Post profile today. “He seems to relish the prospect of the largest-ever strike against a single U.S. business,” the Post story says, under the headline “Sean O’Brien’s summer of the strike.” Striking against one of the only private-sector companies that has added tens of thousands of union jobs over the past decade might seem like a poor strategy, but as we saw with the ILWU, unions often don’t have workers’ best long-term interests in mind.