Port Strike Shows How Unbalanced US Economy Is
Will It Help?
Everyone, including yours truly, has commented on how the longshoreman’s strike is going to produce renewed inflation. Many have gone on to wax rhetorical about how the strike will damage the nation’s economy.
Yet we should not overlook that the strike is itself a product of the 2022 hyperinflation, and all the dislocations which have emerged in the wake of the COVID lockdowns of 2020.
On both sides of the bargaining table, when we look closely we see how the excesses and lunacies of the COVID Pandemic Panic are continuing to disrupt not just the overall economy but people’s lives as well.
Will the strike restore some semblance of balance? Certainly that is the hope. Whether that will be the outcome remains very much to be seen.
It scarcely bears mentioning how impactful inflation has been to the average paycheck over the past few years—yet there is no denying that there has been significant impact.
But such macro-level success is unlikely to hit home for regular Americans. A family of four now has to spend roughly $2,500 a year more on groceries than when the president took office. House prices have gone up by nearly a quarter.
These acute strains on the household purse have not been offset by earnings growth. Real-terms weekly wages are down 2.1 per cent.
Inflation has impacted dock workers as well—no one has been immune from the inflationary surge over the past few years.
Concerns over renewed inflation has been a recurring theme among many when discussing the strike. Partly this is because the last major work stoppage by the International Longshoreman’s Association in 1977 coincided with the hyperinflation of the late 1970s.
Similar to the current economic situation, inflation rates declined through the summer and early fall of that year. After three months of consistent inflation of 0.3%, the port strike helped month-over-month inflation jump to 0.5% in November 1977.
As I noted yesterday, an uptick in monthly inflation of at least that amount is very much within the range of possible outcomes the longer this strike drags on.
Still, when we look at the longshoreman’s headline demands—principally, a 77% increase in wages over the term of the contract—we can begin to understand where that number originated when we consider how inflation has altered the pricing landscape in this country.
Over the life of the ILA’s last two contracts, dating back to October of 2013, consumer prices have risen 34%.
Energy prices are up 14%, and food prices are up 39%.
There is no exaggeration to say that everything is way more expensive today!
Yet when we look at the ILA’s master contracts for the past two contract terms dating back to October, 2013, we do not see a significant number of wage increases over time.
For longshoreman just starting, in fact, the starting pay of $20 per hour is the same today as it was in 2013.
While the contracts call for some wage increases the more years of service one accumulates, even veteran longshoreman enjoy contract rates only $7 greater than in 2013.
Even before the pandemic and the subsequent hyperinflation, the ILA wage structure was slowly losing the battle with the Consumer Price Index.
If we use the Consumer Price Index as a deflator to restate the ILA wage structure in constant “real” dollar terms starting from the beginning of the 2013-2018 contract, we can see just how much wage erosion the longshoreman have experienced.
From an economic perspective, fully half of the ILA’s 77% wage hike request is little more than “reflating” the ILA wage structure to account for ten years’ worth of inflation.
Given the economic dislocations since 2020, is the ILA being unreasonable asking for double what it would take to bring their wages back inline with inflation? Is the ILA assessing that price levels might surge another 34% over the next five to six years?
Answering that would require more information about the ILA’s internal discussions over wages than I possess, but we know from the union’s own public statements that they are seeking a significant wage boost for another reason: shipping companies have done quite well over the past few years.
ILA President Harold Daggett was blunt and to the point when it came to shipping company profits: he wants the longshoreman to share in the wealth.
"USMX brought on this strike when they decided to hold firm to foreign-owned Ocean Carriers earning billion-dollar profits at United States ports, but not compensate the American ILA longshore workers who perform the labor that brings them their wealth," ILA President Harold Daggett said in a statement.
And shipping companies have done well since the pandemic. A survey earlier this year by maritime analytics firm Sea Intelligence showed the major container carriers saw their profits per container more than quadruple between 2020 and 2022.
Why were shipping companies making so much money per container? Simply put, the lockdowns of 2020 snarled global supply chains that badly, making freight capacity that much more dear.
This is one of the many reasons I have long referred to the lockdowns as the “lunatic” lockdowns, and one of many reasons I argued at the time that the lockdowns were an extremely bad idea.
The surge in shipping revenues and profits between 2020 and 2022 is one measure of the price the world has been paying for that bit of lunacy.
Gee, it sounds as if I am implying that the ILA wage demands are reasonable and should simply be met forthwith. Am I saying that?
Not exactly.
Shipping companies did very well for a couple of years after the pandemic. Starting last year, their shipping rates finally fell back down to earth.
The “wealth” Daggett wants for his dock workers has already come and gone. While shipping forecasts suggest that there will be some revenue growth through the remainder of 2024 and into 2025, the enormous profits of the pandemic years are fully a thing of the past.
While the surge in shipping company profits was real, it is also very much a thing of the past, and the union contract just expired made no provision or even discussion of how to address such corporate windfalls by the carriers.
The inability of the USMX and the ILA to find a workable common ground particularly on matters of wages, is a large part of how we are come the point of this work stoppage (the other major reason involving AI and automation is a far more esoteric issue which
explores quite succinctly).Do the ILA longshoreman have a legitimate claim on the atypical profits of shipping companies during the COVID Pandemic Panic era?
Certainly Harold Daggett believes they do. WIth equal certainty the negotiators for USMX believes they do not.
With or without a piece of that profit pie, however, there is the economic reality of significant consumer price inflation in the recent past, and there is a likelihood of renewed consumer price inflation in the near future. Perversely, this ILA work stoppage is quite likely going to be one of the major reasons inflation does return to the US economic landscape.
There are other reasons as well, not the least of which is the recent bottoming out of energy prices on the global market.
In reality, inflation in a lot of areas never fully went away, and what we are seeing now is the removal of the deflationary and disinflationary trends in specific portions of the economy which has served to maks where inflation continues to occur.
We would not be having to contemplate the circumstances of longshoreman at at all but for the hyperinflation of 2022, and for the global supply chain disruptions stemming from the Pandemic Panic, and all the serial authoritarian lunacies it occasioned. The shipping company profits would not have surged to levels which makes Harold Daggett extremely lustful for a piece of that pie without the lunatic lockdowns worldwide.
We would not be facing an inflation-inducing dock worker’s strike were it not for the extreme dislocations of 2020-2022. The inflation of the near past is proving to be a catalyst for the inflation of the near future.
Hopefully, the work stoppage will be of short duration and its economic impacts relatively minor. That would be by far the best case scenario.
Yet even if the work stoppage is of short duration, the economic realities it lays bare are not ones to disappear with a mere waving of a contractual pen. The distortions inflicted on everyone by the COVID lockdowns are still very much with us, and are still having pernicious effect on the world around us. The ILA strike itself is blunt testimony on the extent to which this is true.
The ILA strike is a sharp reminder that, while we may be well and truly done with COVID and all the Pandemic Panic nonsense it generated, the Pandemic Panic is far from being done with us.
I'm having a hard time being sympathetic to the ILA right now. They are incredibly well compensated. West Coast ports have more automation than the East Coast and Gulf region. International ports, especially in parts of Asia, are automated. Automation creates incredible efficiencies that would benefit markets and consumers. Stevedores and port workers have always resisted efficiency and innovation. They resisted the use of cargo containers. The optics for the strike are poor right now. Too many people are suffering from the hurricane's aftermath. I question whether the ILA delivers the value for the wages being paid, especially since no new efficiencies are created.
Excellent post Peter.
The economics and linear common sense you lay out here, will of course be steam rolled in the fake news with emotional, equitable and political sound bites, meant to turn the public against the striking workers, that cast shade on the regime or it's dying economy.
Had these been fast food workers, there'd be protests in the streets calling for a 200% increase, to give them a dignified and livable wage. The difference, as you know, is the progressive, liberal, marxists in that scenario would have the luxuries of time and lack of impact - as striking McD workers are not going to shut down industries or empty store shelves.
The typical cat calls of greedy union workers and price gouging retailers - in an attempt to force a settlement or end of the strike - will be forthcoming. The drooler in chief will come out of the crypt and tell secretary booty-juice to intervene and "save America". And the cackler, when asked about the strike, will lament her childhood as a middle class pleb.
I've never been a fan of unions (having been in the BLET when I worked on the RR). Their original intent was good and served a purpose, but they are all but organized crime and grifters now - especially at the national levels. Had the Longshoreman union leaders been working hard for the dues paying members each and every year, that 77% disparity would be much less and their members might've felt less urgent about the walkout. I do think strikes are effective and warranted, when the workers see no other option, to problems they see no fix for (either on the union or company side).
I'd ask those who are and will demonize these workers: "Who makes a bigger impact on the economy, supply chain and your daily lives - the dockworkers or the fast food employees??"
The answer should be crystal clear, but if not now, will be in about 2 weeks.
If we agree the answer is the dock workers, then why would you not support them (workers who support and make possible your daily comforts and prosperity), the same way you supported and argued for a burger flipper, to make $20/hour??