Thousands of dockworkers are on strike this week to protest contract provisions they deem unacceptable. Talks between their labor union and the company that contracts with them fell through in the 11th hour, and now the historic port strike is set to halt about half of US container traffic and bring about major disruptions to the US supply chain.
What caused the strike? What are the prospects of resolving it quickly? And what are the impacts we can expect on the US economy, production, and supply chain from this significant walk-off? These are the questions on everyone’s mind right now. And in this article, we’ll explore just what is happening and why, and take a look at what the supply chain will look like as a result.
At 12:01 AM on October 1, nearly 50,000 longshoremen and dockworkers from Maine all the way down to Texas walked off the job. These members of the International Longshoremen’s Association (ILA) began picketing after months of negotiations fell through over details of a new contract with the US Maritime Alliance (USMX).
This is the first time in almost 50 years this labor union has picketed. The last time was back in 1977, and it lasted a full 45 days. This one is four days old, and has shut down approximately 50% of all US container traffic, affecting ports down the entire Eastern Seaboard as well as the Gulf Coast.
The ILA was created over a hundred years ago in the Great Lakes region and really became a major force after its ranks swelled in response to a 1934 strike in which 12,000 longshoremen (35,000 maritime workers in total) picketed for 83 days on the West Coast.
Ultimately, the port strike comes down to two demands: much higher wages, and a hard ban on automation.
As with most strikes, like last year’s autoworkers strike, money is a big factor. But the ILA isn’t asking for 20% or 30% salary increases like the autoworkers were. They want much more. Apparently in an effort to align East Coast wages with their West Coast counterparts, union workers are demanding annual raises of $5 per hour each year for six years straight. This represents a total raise of nearly double what the new contract already offered.
USMX already offered starting wages for the first year at $20 an hour up to $39 an hour for workers with six or more years. But the port strike was launched because the USMX rejected a proposal to start workers at $44 per hour for the first year up to $69 in year six. The union argues that many of their workers are handling multi-million-dollar equipment, and that this qualifies them for nearly 100% over what they’re currently making. Hours before the midnight deadline, USMX increased their offer from 40% to a 50% raise, but the ILA rejected that offer.
The second demand is what can only be described as a ban on automation. Ports are increasingly turning to cranes and driverless trucks to load and unload container ships in an attempt to reduce the number of humans needed. The Longshoremen’s union demands this be completely shut down. While there is already language to cap this reliance on automation in the proposed contract, the ILA wants “airtight” language that the ports won’t introduce automation “or semi-automation.”
In other words, they want an all-out automation ban.
Without a doubt, shutting down every single container port on the Eastern Seaboard and Gulf Coast is causing massive repercussions to the US supply chain. Already, reports are coming in that consumers are panic-buying toilet paper and paper towels. However, this is probably just a throwback to the COVID days, as these products will not be affected by the port strike.
But shortages and higher prices are certainly coming for a number of other items. Perishable items that are imported are an obvious risk – things like bananas, cocoa, seafood, and pharmaceuticals. But others are also likely to see price surges, such as electronics, cars, machinery parts, and alcohol.
On the low end, some are estimating that a week-long port strike would cost the US economy $2.4 billion USD. But other economists are estimating the strike will wind up costing the US economy up to $5 billion USD per day. And we’re already four days into it. As the near miss with the rail workers strike in 2022 demonstrated, the potential for multi-layered harm to the supply chain is significant with any large-scale strike.
The primary effect will be port congestion on the West Coast, as shipments are re-routed. Shippers will be forced to seek out alternative ports like Mexico’s Port of Ensenada to alleviate the congestion.
Also, the added transportation costs and time will factor into calculating backlog and price hikes. And as the dockworkers continue their protest, the backlog could worsen, even impacting Black Friday and the upcoming holiday shopping season.
No one knows how long this port strike will last. But the longshoremen have made it clear they’re prepared to strike for as long as it takes to have their demands met. A compromise usually means the two sides meet somewhere near the middle. But an objective observer would likely conclude that negotiations met middle ground during the final hours before the strike, and the dockworkers rejected the compromise.
President Biden, on his way to visit the areas devastated by Hurricane Helene, called for the two sides to resume negotiations and avert what he called a “man-made disaster.” He called on the companies that control the ports to consider how incredible their recent profits have been and consider giving up more to end the stalemate.
Naturally, Biden does not want to alienate union workers by invoking the Taft-Hartley Act, which would force workers to end the strike. And he has stated he will not do so. But neither does he want to see prices soar just before the national election. All the pressures are in place to resolve this crisis quickly. But as of yet, a solution seems elusive.