The power of labor

“Shutting down the ports in defiance of the contract and the arbitrator‘s order in no way benefits an already-fragile U.S. economy.” --Steve Getzug, spokesman for the Pacific Maritime Association, the group representing 29 ports on the U.S. west coast.

In case you missed it, there was a “May Day” work stoppage at all the ports on the U.S. west coast last week on May 1, as 15,000 members of the International Longshore and Warehouse Union (ILWU) stayed home between 8 a.m. and 5 p.m. ostensibly to protest the ongoing war in Iraq. However, the May Day work stoppage is in actuality an annual event conducted by the ILWU and it shows that labor still has some pretty big muscles to flex, especially in the transportation industry.

It‘s also worthy to note that the union went ahead with its plans despite a ruling by the Coast Arbitrator - essentially the Supreme Court on the waterfront, according to Steve Getzug, spokesman for the Pacific Maritime Association (PMA), which represents the ports - that ordered the ILWU to treat May 1 today as a normal work day.

“This work-stoppage, illegal under the ILWU-PMA contract, comes just two months prior to the expiration of the current labor agreement,” noted Getzug in a press statement last week. “Today‘s actions raised the question of whether this was an attempt to leverage contract negotiations.” He also expressed concerns that the ILWU might use slowdowns as a negotiating tactic when the current six-year labor contract expires on July 1 this year.

This is a bog deal because the west coast ports represent a critical linchpin in the U.S. economy. Since 2002, overall container volume is up 45% and as a result, west coast port operations (including non-containerized cargo such as bulk and autos) now support eight million U.S. jobs and contribute 11% of the U.S. gross domestic product (GDP). The domestic business impact of West Coast port trade is $1.3 trillion - roughly equivalent to the GDP of Canada or Mexico.

Needless to say, the longshoremen have some serious clout out there on the west coast - and good pay to boot. The average full-time wages for fully registered port workers are $136,000 a year, and their benefits package, including pension and health care, costs more than $50,000 per worker. Why, you may you ask, do they get so much? Answer: necessity. These folks unload all the goods coming from Asia into the U.S. - goods that are partly the result of efforts to outsource manufacturing to cheaper locales overseas. Without the longshoremen, commerce grinds to a halt - as do many of the global supply chains many companies here in the U.S. rely upon.

The need for labor - and the need to treat it well - is occurring in trucking as well, to an extent. More than 7,000 members of the International Brotherhood of Teamsters union, for example, just ratified a new labor contract with DHL Express - a company owned by German giant Deutsch Post. That follows a pact approved at UPS Freight - the former Overnite Express - covering 10,700 Teamster members this past April. Both of these deals are the first new national pacts negotiated by the Teamsters in more than 30 years, the union noted.

We‘ll be seeing more of this, I think, as labor gets scarce not only in trucking but in the U.S. as a whole as the “baby boom” generation retires and is replaced by the far smaller “Generation X” population.

“Look at the overall demographic shift here - you have 78 million baby boomers that start retiring in 2008 being replaced by Generation X, which is comprised of only 45 million workers,” says Richard White, VP-marketing and communications for the Automotive Aftermarket Industry Assn. “Basically, you have a lot of people retiring very soon and not enough people to fill the jobs they are leaving.”

Trucking is especially feeling this pinch. According to the American Trucking Association (ATA), the industry is short 20,000 drivers annually right now compared against the amount of tonnage it hauls - which will grow to 114,000 by 2014 if current conditions remain unsolved.

This is but one reason why the balance of power may shift to the labor side of the ledger fairly soon in this industry - and none too soon for many drivers in the long-haul segment of the market. Yet it also may not be a huge negative for trucking, if handled correctly: lord knows, UPS has managed to become a more than nimble competitor in the freight world with its unionized workforce. Look at the Teamsters deal with DHL Express, also: it‘s five-year contract (which expires on March 31, 2013) offers annual wage and benefit increases, including $8.35 over the term of the contract for pick up-and-delivery and clerical workers; all health-and-welfare and pension funds are maintained for current employees; and a cost-of-living adjustment, or COLA, applies to all employees.

The Teamsters added that the deal should help save DHL money, as its lost billions since purchasing Airborne Express in 2003, including $900 million last year. “Creating a national contract was a complicated undertaking and our members have shown that it was worthwhile work,” said Brad Slawson, co-chair of the Teamsters national negotiating committee. “Not only were we able to negotiate significant economic gains for members, this agreement provides job security by allowing DHL to better compete in this tough industry.”

And the freight market is only going to get tougher in the months ahead.