Longshoremen serving U.S. East Coast and Gulf Coast ports went on strike yesterday.
Here’s something that I find weird about this strike:
- Foreign labor can’t take these jobs.
- Only U.S. management can.
- Impact on consumers is essentially nil, either way.
Interesting, to an economist. That puts a different light on the union’s “no automation” stance. I think it’s fundamentally different from (say) auto workers.
Let me pin down a few more facts, maybe correct some prior errors. That’s what this post is about.
What are ILA demands?
From CNBC, we get a crisp list of demands, quoting the head of the ILA International Longshoremen’s Assocation:
- “5 an hour per year increase over six years,
- all royalties for containers handled,
- and strict language against automation.”
For this post I’m interested in the last one.
The royalties thing seems to be a modest worker-productivity-related bonus. Modest seems reasonably, considering that some of the folks at issue are swinging around 40-ton containers of stuff. Probably inadvisable, possibly infeasible, to provide a strong incentive to hurry.
OK, what does ” …. strict language against automation.” mean?
Taking a step back, the automation technology at issue is clearly explained on gCaptain. From my layman’s perspective, they have machines now that’ll move/sort cargo containers just like packages.
They’re described as “robots”. The key thing is that they do this without requiring a crane operator. The robot operates the crane automatically, including routing of the containers via barcodes. (I.e., like UPS package sorting).
Let me pause here and say that I immediately thought of Terminator. I’ll try to suppress that.
Automation means moving tractor-trailer-loads of stuff, in metal shipping containers, off ships, without human intervention. Near as I can tell. Crane operators and associated personnel lose their jobs. Apparently, the West coast branch (of the ILA, I think) agreed to this in the last round of negotiations, and lost (and estimate of?) 700 jobs at one port due to automation of that facility.
So they want the operating company to agree not do to that, in the East and Gulf ports. They don’t want to lose these jobs. So they don’t want automated (robot) unloading of containerized freight.
Here’s what makes this kind of interesting.
I may regret saying this, but.
I think to a very large degree, they can’t lose these jobs to foreign competition. Or, really, to any competition.
And that’s what makes this interesting.
The usual anti-Luddite argument is that automation is inevitable. If you don’t automate and put those workers out of their jobs/reduce your costs, then your competitor will, and run you out of business.
So in the normal case, sure, Luddite are losers. Working to prevent a labor-saving (and so presumed cost-saving) change is always a losing proposition. The jobs will be competed out of existence, one way or another. As the business owner, either I cut costs by firing my workers and so the business survives without those jobs, OR I don’t and go out of business, and neither the business nor the jobs survives.
Either way, the Luddites lose their jobs.
Anyway, the kneejerk reaction is “here’s the union, trying to be Luddites, wanting to ban automation … what a losing proposition that is.
But … no. Not necessarily, in this case.
First, where else is the freight gonna go? And these are 100% (I think) union ports. If the ports remain non-automated, then … they remain non-automated.
It’s not like some U.S. city can grow a brand-new, rail-connected ocean port, with automation but no ILA workers, and undercut the rates at existing U.S. ports. Can they? At least not in short order.
And there is no second. I stand by my opening. The only entity that can force automation/job loss on these ports is management. Not foreign competition.
Further, from the import consumer’s perspective, longshoremen’s wages account for a pittance in the overall cost of imports. (See last post. That needs some checking into, below, but is probably correct-enough as is.) Given that, there’s no driving need to kill these jobs with automation.
Heck, pay them double what you’re paying them now AND keep the system as-is (no automation), and best guess, that’ll cost me 25 cents on the $100 in imported-goods’ cost. Which, by the time they are marked up and sold, I won’t even notice. If I would have noticed it, at wholesale cost.
Yesterday’s crude calculation, checked, still peanuts.
My claim from yesterday is that the wage bill for longshoremen at U.S. East and Gulf Coast ports is a trivial fraction of the cost of the imports they handle.
My estimate was a quarter-of-a-percent. In that neighborhood.
No math mistake. I put what I did yesterday into a spreadsheet, and got the same answer I got yesterday. FWIW.
Value of exports ignored. The focus of the first articles I read was on imports, and how this might inconvenience consumers, U.S. manufacturers, “the supply chain”. So I didn’t even think to include value of exports.
I’m guessing value of exports would be about half the value of imports, but I haven’t checked that recently. (You have to be careful to avoid exports of non-tangible items. Whatever it is, all it does is make the longshoremen’s wage bill look even smaller, in proportion to value of imports and exports combined.
But see next point.
Bulk commodities should have been excluded from the calculation. Similarly, military materiel is unaffected. Or so I read. And at least one more, common-sense category.
As I understand it, this contract is only for movement of containtainerized freight. Or nearly. Stuff in shipping containers. (Cars, I’m unsure of.)
I read that oil and gas, for example, were unaffected, along with a throwaway line about bulk cargoes in general being unaffected by this particular contract.
Best guess, bulk freight makes up a small percentage of value of imports. Just scanning the graph below, I’d guess no more than a third.
Source: Tradingeconomics. com. Used without permission. Red annotations are mine.
Wage bill waffling. Finally, for the pro-forma wage bill, I just plain made up everything except the cited average wage of $35 an hour. The $35 figure, I read somewhere, and saw it instantly disputed.
In any case, in the pro-forma, I had every union worker under this contract (estimated at 45,000 here, because I read that somewhere) working an 8-hour shift every day of the year (so as to overstate the wage bill, if anything), at an average wage of $35/hour (because, as note above, I read that somewhere).
I have since read that around 75,000 ILA members may be at these ports, not all covered by this contract, but all will obey the strike order (none will cross a picket line). So, even with all the other assumptions of the pro-forma, if you used this figure, you’d up the wage bill by 2/3rds.
Conclusion. It’s still peanuts. The wage bill for the workers at question is a small fraction of a percent of the value of the goods they handle.
