A deal between UPS and the Teamsters shows the power of organized labor

Editor’s note, July 25: UPS and the International Brotherhood of Teamsters reached a tentative agreement on Tuesday, which should avert a nationwide strike that had been planned for August 1. The provisional deal includes a $7.50 an hour pay increase for all UPS employees, as well as the elimination of a lower-paid class of delivery driver and the installation of air-conditioning units in delivery vans. If the deal holds, it represents a major victory for unions at a moment of intense labor strife. The story that follows was originally published on July 11 and last updated on July 14.

When UPS workers last went on strike in 1997, the New York Times reported that the labor stoppage “created myriad inconveniences, large and small, for companies and consumers across the nation” and “largely crippled” the company. It lasted 15 days before the delivery company acceded to many of the union’s demands.

Now, UPS workers are slated to strike again at the end of the month if they don’t come to a union contract agreement. If they do strike, things could be a lot worse this time around, putting even more pressure on companies, consumers, and UPS. That’s because the economy a quarter-century ago is entirely different than now — one where package delivery is more important than it’s ever been.

“That was a very long time ago and the world was very different,” said Gregg Zegras, president of the global e-commerce business unit at shipping technology company Pitney Bowes, which collects data on the package delivery industry. “Everybody shopped in stores.”

While competitors like FedEx and the US Postal Service could pick up some of the deliveries, experts said logistics networks are too strained to fill many of the gaps that would be created by a UPS strike. That means headaches and delays for many of the people relying on UPS, which is responsible for about a quarter of all parcel delivery volume in the US, according to Pitney Bowes.

“There’s no good that comes from this for the consumer. There’s no good that comes from this for the merchants. And there’s no good that comes from other players in the industry,” Zegras said, adding that there’s not enough capacity among the remaining parcel delivery services, including Pitney Bowes, to handle the demand.

A 10-day strike would cost the economy more than $7 billion and be the costliest work stoppage in at least a century, according to a new study by Anderson Economic Group, which researches labor disruptions. That includes $4.6 billion in losses to consumers and businesses that rely on UPS, as well as more than a billion in lost wages and $800 million in company losses.

E-commerce had already been a growing part of Americans’ shopping before 2020, but it shot up during the pandemic and, though down from its peak, is only expected to grow. E-commerce makes up about 20 percent of all retail sales when you exclude things like gas and motor vehicles, according to Bureau of Labor Statistics data analyzed by Jason Miller, interim chair for the supply chain management department at Michigan State University’s business school, and it’s up about 25 percent from pre-pandemic levels. Another way to look at it: Employment in the courier and messenger sector stands at 1.1 million, which is double what it was in 1997. UPS employs about a third of those workers.

“We’re certainly much more reliant right now on parcel carriers than we were back in the ’90s,” Miller said. He pointed out that the situation isn’t just about consumers getting their Amazon packages. Businesses, too, are much more reliant on carriers like UPS to send them everything from sneakers to medical supplies to car parts, and about 40 percent of UPS shipments go to businesses.

In other words, a strike at UPS doesn’t just mean trouble buying stuff online and receiving anything from food to medical supplies from merchants — you’d also have trouble buying stuff at stores.

“If I had to put it on a scale with one being not at all disruptive and seven being pure economic catastrophe, this is probably a five right now,” Miller said of a potential strike. He estimates that competitors could pick up about 20 percent of UPS package volume, and that’s only because they’ve held onto workers even as e-commerce demand has dipped from pandemic highs.

But for the 340,000 UPS workers whose contract is up at the end of the month, a strike may be the only option to secure additional benefits for some of the company’s lowest-paid workers. Negotiations over a new contract fell apart last week, with each side blaming the other; the International Brotherhood of Teamsters, which represents UPS workers in the country’s largest private-sector contract, said UPS put forth an “unacceptable offer to the Teamsters that did not address members’ needs.”

UPS told Vox in a statement, “We’re proud of what we’ve put forward in these negotiations, which deliver wins for our people. The Teamsters should return to the table to finalize this deal.”

While the union and UPS had come to agreements over issues like getting rid of a two-tier wage system that the union said underpaid part-time workers and getting air conditioning in vehicles, the sides are still at odds over cost of living increases and raising pay for part-time workers.

“They’re fighting for the little guy,” Art Wheaton, director of labor studies at Cornell University’s labor relations school, said. “It’s not just, ‘We have all the strength of all the drivers because the Teamsters are known for truck drivers.’ This is for those moving boxes. It’s a little lower on the totem pole or the hierarchy of the company — it’s the lower levels is what they’re really fighting for.”

Given the stakes, some company analysts had expected the negotiations to go more amicably, predicting a “handshake deal” earlier this month. Others think the company will wait till the last minute to offer a better deal, rather than risk a strike.

If workers do strike, experts say it likely won’t last long, and UPS could come back to the table quickly in hopes of limiting the damage to its bottom line.

However negotiations are resolved, they will likely have big impacts on other package delivery companies, including Amazon, which has a logistics operation to rival UPS and has also been fighting its own union battles.

Indeed, the Teamsters have set their sights on unionizing Amazon, and some California delivery drivers working for an Amazon contractor have already unionized with the Teamsters. If the Teamsters get a good contract for their workers at one delivery company, it will force competitors to raise wages and benefits as well, lest they lose workers in a tight hiring market.

“The best thing they can do to help organize Amazon is make a big win at UPS,” Cornell’s Wheaton said.

Update, July 14, 11:50 pm ET: This story was originally published on July 11 and has been updated to include a new report on the potential economic losses of a strike.

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