Teamsters strike with UPS could snarl commerce as labor flexes muscle

A strike authorized Friday by Teamsters working for shipping giant UPS is the latest flash point in a conflict between organized labor and global logistics companies that 40-year high inflation triggered.

The UPS Teamsters strike authorization is the latest sign of an emboldened U.S. labor coalition hoping to make gains following poor working conditions, low pay and the cost of living crisis set off by the pandemic.

It arrives on the heels of work stoppages on West Coast ports by longshoremen and port workers earlier this month, as well as a threatened strike last year by U.S. rail workers that prompted the White House to intervene despite the Biden administration’s strong ties to labor.

If the current Teamster negotiations break down, the authorization could lead to the largest U.S. strike in decades, involving some 340,000 warehousing, transportation and delivery workers bound by the largest single private sector bargaining agreement in the country.

“There are multiple scenarios for labor actions to be pretty heavy this year, and the Teamsters at UPS is certainly one of them,” Art Wheaton, director of labor studies at the Cornell School of Industrial and Labor Relations (ILR) in Buffalo, N.Y., told The Hill.

“There are a lot of frustrations on the part of union workers where they’re feeling like they have not been receiving their fair share of the gains and profits made by different companies,” Wheaton said.

Workers want a larger share of company successes

“Teamsters are working in lockstep for a new five-year agreement that guarantees higher wages for all workers, more full-time jobs, [and] an end to forced overtime and harassment from management,” the union said in a Friday statement announcing their intention to strike if contract negotiations fail.

The Teamsters have said they are fighting for better working conditions and a larger share of soaring company profits.

Kara Deniz, a spokesperson for the Teamsters, told The Hill on Tuesday that negotiators have reached an agreement on 24 provisions in the national contract so far, but talks on the economics portion of the contract centered on wage levels and pay increases have yet to begin.

Union leaders want an end to what they call a “two-tiered” wage system that allows workers who have been with the company longer to make more money for doing the same job as those who have joined more recently.

This wage system was created during the last contract negotiation five years ago and involves a driver classification known as “22.4,” a job that was supposed to involve both outdoor and less strenuous indoor work. Union reps say that provision quickly turned into a traditional driving position, only for $5 less an hour.

Recently elected Teamsters president Sean O’Brien has been at the table across from UPS every day, establishing a new precedent for negotiations, the Teamsters representative said.

“[Our workers] are busting their butts, they are working hard. And so they deserve every bit of their share of how profitable this company has been,” the Deniz said.

A backdrop of soaring profits

A quick look at UPS’s recent market cap shows just how remarkable those profits have become in the aftermath of the pandemic. 

UPS’s trailing 12-month profits rose 30 percent between the fourth quarter of 2020 and the fourth quarter of 2022, as measured by financial data company Macrotrends. 

Since the last five-year contract negotiation between the Teamsters and UPS in 2018, company profits have risen to $11.5 billion.

The company felt a major windfall during the pandemic’s economic lockdowns, as people stayed inside and relied more on delivery services, with researchers at Rensselaer Polytechnic Institute in New York noting “a significant growth in demand for online shopping.”

‘Greedflation’ pressures economy and revives labor

Even now, as the UPS profit surge has begun to subside, the company’s gains follow wider trends in the economy.

Dubbed “greedflation” by economists, many corporations have seen their profits soar as they’ve raised prices amid high inflation and regulators struggling to cool down the broader economy.

After hovering generally between $1.6 and $2 trillion annually in the decade before the pandemic, corporate profits shot up to more than $3 trillion in the second quarter of last year and have taken up a larger share of prices per unit of real value in the economy.

While profits are now falling back in the direction of pre-pandemic levels, a growing body of literature is blaming a tertiary wave of inflation on increased profits and the increased capacity of companies to charge more due to more tolerant consumer behavior.

“Profits across a broad range of industries have risen markedly. … This means that many firms have so far been able to increase their prices beyond the increase in nominal wages, and in many cases even beyond the increase in energy costs,” European Central Banker Isabel Schnabel noted in a speech last September.

“The rise in profits is strikingly different from previous crises that have all seen profits fall,” she said.

UPS sees labor contract negotiations as a ‘risk’

Asked about the company’s recent profit margins, a representative for UPS told The Hill that profitability at the company allows for increased capacity to hire more workers.

“A growing UPS is beneficial to Teamsters as much as it is to UPS,” Natasha Amadi, a public affairs representative for UPS, said. “We have proven that we are a growth engine for the Teamsters and we want to continue on being that.”

Earlier this month, UPS agreed to “equip all newly purchased U.S. small package delivery vehicles with air conditioning” in 2024.

The company also promised to install additional cab fans and heat shields in delivery trucks, after UPS came under fire for viral social media posts showing excessive temperatures putting drivers in uncomfortable and even dangerous working conditions.

In public filings, UPS lists the results of labor contract negotiations among the “risks” facing its business.

“We must attract, engage, develop and retain a large and diverse global workforce, while controlling labor costs,” the company said in its most recent annual Securities and Exchange Commission filing. “If we are unable to hire, properly train and retain qualified employees, we could experience higher labor costs, reduced revenues, [and] further increased workers’ compensation.”

An increasing number of high-profile labor activities

Across the American business landscape, strikes and work stoppages increased in 2022, with 26 new major strikes affecting more than 120,000 workers, according to Labor Department data.

Similar labor unrest has occurred in many countries, a natural consequence of inflation and a rising cost of living, labor experts say.

But as American approval ratings of labor unions have risen to the highest level since the 1960s and an increasing number of familiar brands, like Starbucks and Apple, are drawn into unionization and organizing campaigns, some experts see a new age of labor activation dawning.

“The United Auto Workers (UAW) have pretty much signaled an all-out war against the Detroit three: that’s Ford, GM and Stellantis, which used to be Chrysler,” Cornell ILR’s Wheaton said.

“If it was just one union rattling its saber and trying to make demands, that’s one thing. But if you’re having Starbucks, Amazon, Apple and all these major companies starting to unionize now, a lot of these pretty substantial bargaining demands become more realistic, especially with all these logistical dilemmas people are having,” he said.

Economists with the United Nations wrote last year that the interest rate tightening cycle that’s now near an end was actually geared more toward getting ahead of the sorts of labor market pressures that are now being realized in increased unionization and more aggressive contract disputes.

“Continued monetary tightening — through rising central bank rates and the normalization of their balance sheets — will have little direct impact on the supply sources of inflation and will instead work indirectly to re-anchor inflationary expectations by further reducing investment demand and pre-empting any incipient labour market pressures,” they wrote in 2022.

Updated at 10:42 a.m.