Keeping Things Moving
By: Dr. M. Ray Perryman
Published in syndication August 09, 2023
As you probably know, UPS and the Teamsters union have reached an agreement to narrowly avert a nationwide strike. This high-stakes standoff likely wasn't nightly dinner table conversation for most of you, but the issue was far more impactful than merely one company and its 340,000 or so workers directly involved in the negotiations. A strike would have caused delivery delays, challenged the supply chain, pushed up inflation, and affected individuals and businesses across the world. It would have been particularly problematic for rural residents and those requiring critical medical supplies.
Globally, UPS serves 1.6 million shippers with deliveries to 11.1 million customers in over 220 countries and territories. In 2022, the company delivered an average of 24.3 million packages daily. Competitors such as FedEx and the US Postal Service would certainly have stepped up and filled some (but not much) of the gap, but inevitably both prices and delivery times would have risen notably.
About half of UPS deliveries are business to business (B2B) rather than business to consumer(B2C). Although consumers would have been inconvenienced (in some instances, significantly), slowing B2B shipments would bring even larger effects due to the ripples through the supply chain as production processes were negatively affected.
It is easy to lose sight of just how interconnected our complex economy is and how even modest disruptions in the flow of goods and services can wreak havoc. The items that are present in virtually any room that you enter will have inputs from more than 100 countries. The recent disruptions that were observed during the aftermath of the pandemic are reminder enough of the chaos and inefficiency that ensues when things don't arrive on time. A work stoppage of any length of time would have cost billions. In fact, our analysis shows that a 30-day strike would have resulted in about $50 billion in losses across a broad swath of the economy.
At a broader level, the balance of power in labor negotiations during this summer of strikes is shifting somewhat towards workers due to tight market conditions. Union membership accounts for about 6% of private industry jobs (7.2 million persons), a proportion which has been falling slightly over time. Among government workers, about 33% are in unions (7.1 million), with the percentages also dropping. It is difficult to compare outcomes for union workers to nonunion workers; the types of occupations vary widely. Generally, union workers have higher pay and benefits, but they also work in specific job categories. It's difficult to isolate what portion of the pay differential is due to unions versus other factors.
In any case, it's great news that the strike didn't happen. We don't need any more headwinds. Stay safe!