Commentary

Union Negotiations in West Coast Ports Threaten the National Economy

The 6-year contract between 20,000 International Longshore and Warehouse Union (ILWU) members and operators of the Pacific Maritime Association expired July 1 at 5:00 PM after a month and a half of unproductive negotiations. While both sides have expressed willingness to avert port closures, talks are expected to drag on throughout the next several weeks. Among the various demands on the table, the largest involves deciding which party will pay the brunt of an estimated $150 million Obamacare tax on the ILWU’s “Cadillac” health care plan.

Given the shipping industry’s history of tumultuous labor relations, the contract’s expiration places 29 ports and 12.5% of the nation’s gross domestic product at risk.

The possibility of a mass strike in the imminent future is highly precedented. In 2002, the ILWU illegally slowed down operations to pressure employers to computerize dock equipment. The subsequent decline in productivity-from 90% to 25% in many terminals-ended up costing the country $1 billion a day. Order was only restored with President Bush’s intervention and invocation of the Taft Hartley Act.

The expiration of the union’s 2008 contract was similarly plagued by union gamesmanship. Protesting the Iraq War, over 10,000 longshoremen, stevedores and other ILWU workers from all 29 West Coast ports left work to attend political rallies. Once again, courts found that these actions violated the law, namely, section 8(b)(4) of the National Labor Relations Act.

These incidences, and dozens like them from other industry sectors, illustrate the major problems inherent to large transportation unions.

First, the relative affluence of union members raises equitability questions. A far cry from popular depictions of their Gilded Age predecessors, modern dockworkers are anything but poor and downtrodden laborers. Compensation is extremely generous not only compared to other blue-collar jobs but to white-collar jobs as well. The average wage for a full-time ILWU worker exceeds $142,000 in addition to $82,000 in non-wage benefits. In comparison, the U.S. Census Bureau claims that as of 2012, median household income for residents of Los Angeles County-home of the two busiest American ports-is $56,241. That places the bulk of disgruntled dockworkers comfortably in the middle or even upper-middle class.

When contract negotiations impede offloading cargo from ships, the subsequent series of events harm the entire economy and especially the low income. Small businesses across the country are particularly sensitive to disruptions; they cannot afford the time cost incurred by irresponsible union actions At the very least, supply chain disruptions raise prices of bulk consumer goods, exerting what amounts to a regressive tax. And, the consequences could be far more severe if current negotiations break down. U.S. Census Bureau estimates that West Coast ports handled $892 billion worth of cargo in 2013. Industry experts estimate that a 10-day strike could cost up to $25 billion place 169,000 jobs at risk.

Second, strong-arm union tactics could exacerbate the region’s declining shipping dominance. Between 2008 and 2013, the West Coast lost over 5% of cargo volume to other areas of the country falling from 43.5% to 48.6% of total domestic tonnage. If the ILWU gets its way in 2014, contracts will be reduced from 6 years to 3. This would double the frequency of periodic labor unrest and halve the amount of reliably peaceful business days. To make matters worse for the West Coast economy, the opening of an expanded Panama Canal next year will make eastern and southeastern ports more feasible destinations for East Asian and Australian goods.

Transportation workers are better situated than those in other industries to strong-arm management at the expense of the nation’s productivity. Ensuring a safe and prosperous shipping environment will require governments to not only bring large unions into full compliance with labor laws, but also to explore new regulations to limit their strangleholds over key transportation industries.