UPS and Teamsters Strike a New Deal: Impacts on the Supply Chain and Labor Markets

Saturday - August 5 2023, 13:35 UTC - 1 year ago

UPS and Teamsters recently announced a new labor agreement that sets a new standard in the labor movement, raised the bar for all workers, and further reinforces the strong bargaining position of unions in the logistics sector. If a strike had occurred, it would have cost the US economy an estimated $7.1 billion and caused disruptions of availability of spare parts, wholesale medical supplies, and retail replenishment. Voting for the contract is expected to conclude on Aug. 22, and many are expecting a positive result.

What’s in this contract? UPS has agreed to: Teamsters General President Sean O'Brien hailed the agreement as a victory. "This contract sets a new standard in the labor movement and raises the bar for all workers," he said. What does this deal say about the supply chain and labor? This deal further reinforces the strong bargaining position of unions representing workers in the logistics sector – not just in the U.S. but also in Canada, Europe and elsewhere. U.S. shipping could still be disrupted amid one of the tightest labor markets in decades, since UPS rival FedEx recently had its 5,200 pilots reject a new labor agreement. That said, TForce Freight – formerly UPS Freight – reached its own new five-year contract with the Teamsters earlier in July, as did competitor ABF Freight. Unionized pilots at Delta Airlines and American Airlines also recently agreed to new contracts with large raises – a 34% boost, in Delta’s case. My view is that UPS was more willing to accept the Teamsters’ demands because current economic conditions favor labor. In addition, the company realized that a strike could have cost it substantial market share, up to 30% of volume by one estimate. Combined with the company’s recent high profits, it was not in UPS management’s interest to let a strike proceed.

What would have happened had there been a strike? Roughly 57.3% of the packages UPS delivers are shipped straight to consumers. The rest go to retailers and other businesses. Based on my years of researching transportation operations and supply chain disruptions, the impact of a UPS strike would have stretched far beyond delayed delivery of everything from pet food to tennis rackets that U.S. consumers buy online. A UPS strike could have disrupted the availability of spare parts for cars and wholesale medical supplies, just to name a few essentials. Consumers would also have found it harder to get clothing and shoes in stores, as retail locations are typically replenished by parcel carriers. Even a 10-day strike could have cost the U.S. economy an estimated $7.1 billion, according to research firm Anderson Economic Group. That would have made it potentially the costliest strike in U.S. history. These costs stem from the 340,000 striking workers losing an estimated $1.1 billion in wages and UPS losing $816 million in earnings. The balance of this estimate would result from the disruptions incurred by UPS customers.

What’s next? The tentative agreement now must be ratified by Teamsters employed by UPS. Voting is expected to conclude on Aug. 22. My expectation is that the union’s rank-and-file members will approve this contract.