Labor peace has come at a price for United Parcel Service, which is offering a generous contract to dodge an imminent strike. The deal shows workers’ strength in a tight labor market, but it could also help the company position itself for the future.
The Teamsters labor union announced Tuesday that it had struck a deal with UPS on a five-year labor agreement. The deal averts a strike by 330,000 UPS workers, who had voted to walk off the job as soon as Aug. 1 if no agreement was reached. Formal talks stalled in early July, but the high stakes of a stoppage kept the company at the table.
The offer that the Teamsters agreed to this week includes large, rapid wage gains. Part-time workers, who make up more than half of the UPS workforce, will get their pay raised immediately to a minimum of $21 an hour, the union says. That’s a huge jump from the current $15.50 minimum, which UPS had previously offered to raise to $20 by 2025 — and it adds up to about 7% a year over five years. Tenured drivers will get a bump too, up to an average top rate of $49 an hour from $42 today, or about 3.4% a year over five years.
These hefty raises will help Teamsters chief Sean O’Brien sell the deal to the rank and file, who will have to approve the agreement in coming weeks. Mr. O’Brien wanted a big top-line increase for sales purposes, as did the White House, which wants to boast that Bidenomics helps union workers.
UPS was willing to pay this price to avoid a strike, which the Anderson Economic Group estimated would have cost the company $816 million over a mere 10 days. The group also estimated a loss of $7 billion across the economy in the event of a strike, since UPS delivers some 25 million packages a day.
UPS was also willing to pay to achieve its goal of greater flexibility in work schedules and new technology. The company isn’t boasting about it, but we’re told the agreement will allow more warehouse and delivery shifts on Saturdays and Sundays, which are currently understaffed.
One risk for the union is that the big raises, especially for part-timers, will give UPS an incentive to replace workers with robots and technology. The Teamsters’ UPS membership has grown along with the company in recent years, but this contract might be the high-water mark for the union’s UPS rolls.
The UPS-Teamsters deal raises the stakes for other labor negotiations, especially the United Auto Workers in their talks with the Big Three U.S. car makers. The big wage gains will also get the attention of the Federal Reserve, which views rising wages as an inflation threat. We think the UPS wage hikes are catching up with recent inflation more than they are driving more price increases. But the Fed’s economists think of this as a wage-price spiral.
The deal’s merits will play out over years for both parties, but the best news is that it’s a relief for shoppers and businesses. Contract standoffs are common when workers are in high demand, but the public wins when a strike is averted.
