About 50,000 members of the International Longshoremen’s Association union have gone on strike against the United States Maritime Alliance, and it is affecting almost all the major ports on the East and Gulf coasts. This is the union’s first strike since 1977.
Around 45% of all imports into the United States are being affected. Estimates of the economic harm caused by the strike range from $500 million a day to over $4 billion a day. Specifically, economists at J.P. Morgan say the economic cost from the strike would range from $3.8 billion to $4.5 billion a day. The latest offer from the port management group is a 50% increase in hourly wages spread over 6 years. In addition, management is offering a substantial increase in healthcare and pension benefits, and the Maritime Alliance would agree to limit the introduction of automation technologies at the ports.
That is the key problem in the negotiations: automation. The union wants guarantees of job security. Management wants to bring U.S. ports into the modern economy. It is noteworthy that U.S. ports are among the most inefficient in the global economy.
“Not one U.S. port is ranked in the top 50 ports for efficiency,” said Scott Lincicome, vice president of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies.
The highest-ranked U.S. port is Philadelphia, at number 83.
Think about that. The world’s largest, most productive economy is hobbled by the world’s most inefficient port facilities. What is equally disturbing is that the dock workers are already well compensated. The typical longshoreman makes over $200,000 in wage compensation and receives benefits with a value approaching $100,000 a year. Dockworkers get Cadillac health insurance. How can compensation approaching $300,000 a year not be fair?
Fortunately, there are many reasons to believe that the economic fallout of this strike will be minimal. Importers and exporters knew that a strike could happen. Companies such as Costco had already taken action in anticipation of the strike. Retailers built inventories. At a price, cargo can always be shipped by air, and the cost is passed to the consumer. U.S. households always pay the freight. The longshoremen making $200,000 don’t care about the consumer, and President Joe Biden doesn’t care either.
Companies involved in international trade are also diverting goods to Canadian or Mexican ports, where they enter the U.S. by ground transport. Alternatively, there are two non-union East Coast ports. Very importantly, the leading U.S. export is oil, which is not being affected by the strike.
Ultimately, politics is the reason everyone should be optimistic that the strike will cause minimal damage to the economy. Nov. 5 is fast approaching, and Biden has said he will not invoke the Taft-Hartley Act, which would ban any strike action for an 80-day period.
Everyone knows that the race for the White House is a dead heat. If the strike were to drag on for more than a week, damage would be done to the economy. Democrats know that “the buck stops in the Oval Office.” If the strike were to bring the economy down, then Biden would be forced to use his power under the Taft-Hartley Act.
As each day passes, political pressure builds.
The media wants headlines, but common sense says that the economic damage will be minimal and that the strike will be settled within a week.
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James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be reached at [email protected]