by Zain Jaffer
As reported in most news media [https://www.npr.org/2024/10/03/nx-s1-5139450/dockworkers-port-strike-deal], the International Longshoremen Association and the United States Maritime Alliance reached a tentative agreement on various issues a few days after an early October 2024 strike. The tentative agreement covered wage hikes, and opposing positions on automation that could replace manual dockworkers.
According to an NPR report, both sides tentatively agreed to a 62% wage increase over six years instead of the union position of a 77% increase over six years but above the 50% initially offered by the USMA. The current contract will be extended until mid January 2025, when they will negotiate on items such as port automation.
The strike, which covered the East and Gulf coasts (not the West Coast), is estimated to handle roughly 500,000 incoming shipping containers a month, and around 300,000 containers outbound. Estimates of the value of these shipments, and the impact on US businesses that need these incoming and outgoing shipments, run into billions of dollars per day.
The problem with these types of strikes is that many business supply chains now run on a “just-in-time” [https://www.investopedia.com/terms/j/jit.asp] system. What this means is that if Factory A needs 100 barrels of plastic resin to make their product, they do not keep an inventory in their premises. Or if they do, they keep a very small amount of it. What they rely on is a synchronized “just-in-time” delivery from their supplier when they need the product, to match their production schedule. This saves them on the cost of holding inventory that they do not need yet.
Unfortunately this strategy relies on the efficient availability and delivery of services by ports, airports, airplanes, trucks, vans, ships, and other transport methods. If any of these methods are crippled, such as during a strike, or an accident like the Baltimore bridge collapse [https://edition.cnn.com/2024/05/14/us/baltimore-bridge-collapse-ntsb-report/index.html], their supply chains get broken. Unless their supply chain managers can find workarounds such as other means to transport these products, their production and their factory will grind to a halt.
If the alternatives had been pretested and prequalified, then it may work smoothly. However if the workarounds will just be done on the day of the supply chain breakdown, there may be problems that may happen that may just be as bad. For example, there would be changes in delivery times, shipping costs, taxes duties and fees, and other considerations.
Another issue that the longshoremen union had was with automation, which does not take sick leave, take vacations, and works 24 hours seven days a week. Unfortunately for the union, this strike just gave an added bolster to the argument for automation.
While it is understandable that the Biden administration, in its desire to curry favor with workers and unions, did not want to intervene, the President has the power to do so under the Taft-Hartley Act of 1947 [https://www.investopedia.com/terms/t/tafthartleyact.asp] if the national interest so requires. If this strike had gone on for a few more days, the economic damage could have been incalculable and added to the hurt that is already being felt by US businesses.
While unions are there to serve the purpose of protecting workers interests, it should also not be used selfishly to advance their interests if the national interest is already under threat. Unions serve a valuable purpose because historically there have also been some selfish abuses by big business.
But this power should be wielded cautiously and not forget that these are service industries that impact the entire wellbeing of US businesses and consumers. They almost crippled the US economy.
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