How The Threatened UPS Strike Would Devastate This Economy
The country is nearing a series of strikes by Drivers at United Parcel Service (UPS), Yellow Freight, and potentially the US Postal Service. These strikes would promise to devastate commerce and industry across the country.
The deadlines for these first two strikes in coming quickly, over the weekend, Yellow Freight was required to make a payment to the Teamsters’ Health and Welfare Fund. If that payment was not made yesterday, then the odds of a strike by Teamsters are almost inevitable. At press time this morning, there was no announcement of whether UPS made that payment.
This coming weekend, the contract between UPS and its drivers will expire. If no agreement is reached, drivers will strike next Tuesday, August 1. Unless the company makes some severe concessions, it is unlikely that an agreement will be reached, given that in the June strike vote, 93% of the union members approved walking out.
UPS is by far the most significant delivery service for small and medium size parcels, carrying 37% of all packages delivered daily. With 340,000 employees, this could be the largest strike in US History. CNN reports that a 10-day walkout could cost the American Economy $7.1 Billion.
Although there was a strike threat ten years ago, there has only been one strike in the history of UPS. It occurred in 1997, and it was a dozy. Even then, it was the largest walkout in US History, representing slightly over half the number of workers as today’s potential strike and less than one-third of today’s projected loss.
Like today’s dispute, in 1997, the Teamsters were upset about a lack of fairness in compensation. Then the issue was that many workers, who UPS Management should have classified as “full-time,” were instead classified as “part-time” and given a lower pay scale. Today the role of Scrooge has been replaced by an unmerciful rate of inflation, which has increased the cost of living, but not the salaries for UPS workers.
This proposed strike is an effort to maintain living standards for UPS employees, and it’s hard to see how management can meet their demands without substantially increasing salaries. Something doubtful to happen, given that the corporation also suffers from higher input costs, such as fuel and equipment.
One of the most interesting dynamics of this potential strike is the overwhelming impact this will likely have on corporate America. Since the beginning of the “production line,” corporations have recognized the need to streamline their use of raw materials and components. Here in America, Henry Ford went to great lengths to match his raw materials to his automobile production. No one wants to see large warehouses full of materials that sit. Accountants noted early on that inventory financing (paying for inventory that doesn’t move) impedes profits significantly.
As early as the 1930’s Japanese Auto Maker Toyota was developing methods to ensure their suppliers delivered components “Just In Time” (JIT) for their use on the Production Line. Although it took Toyota years to implement their systems, by the 1980s, this new lean production method helped Toyota compete against the US Big Three Auto Markers. American manufacturing company stood up and listened. The Americans would also begin using this “Just In Time” method for their production.
In time the rest of American industry would also adopt the Just-In-Time process. Today JIT is the dominant approach used by American Industry and American Retail companies. That Home Depot, or Wall Mart, for instance, also try to match the amount of their inventory on hand with their projected sales. Retailers’ goal is to have just enough inventory to match their customer’s demands but not enough to incur higher inventory financing. Throughout the country, at almost every level of commerce, JIT matches inventory with either production demand or retail sales.
So let’s imagine if 37% of that to be delivered inventory stops. If the UPS workers go on strike, and those just-in-time deliveries are not made. Then FedEx, the Postal Service, and other smaller delivery services would not be able to make up for those missed deliveries. Inventories deliveries would suddenly stop. The warehouses of suppliers would begin to fill with undelivered wholesale goods. Not just the Auto Makers (there’s another strike on deck for them) would grind to a halt, but also many of the retail stores would start to see empty shelves.
In strikes vital to the nation’s economy, the Federal Government often stepped in to help settle the dispute. In 1978, President Jimmy Carter fired a group of dissident Postal Workers who had gone on strike in the eastern part of the country. In 1981 President Reagan fired the Air Traffic Controllers who had gone on strike, citing the need to keep the airlines operating. As recently as 2021, the National Labor Relations Act required the “International Longshore and Warehouse Union” to return to work. While there can be no doubt that a work stoppage in those Eastern Ports would have been detrimental to the region, it’s also apparent that a UPS Strike would be harmful to the entire nation.
Yet we hear nothing from Washington — no effort to offer support to the ongoing negotiations. Perhaps part of this is because the country does not have a duly confirmed Secretary of Labor. Julie A. Su is the current acting secretary after she failed to receive the required number of Senate votes to confirm her nomination. Ms. Su has been conspicuously absent from the negotiations between UPS and the Teamsters.
So the nation hurdles toward potentially one of the most devastating labor strikes of all time, with little genuine effort to avoid this economic catastrophe. The current contract between UPS and the Teamsters expires on Monday, July 31. A strike will follow the next day if no agreement is reached.
Follow me here on Medium for more stories from the ValueSide.
