The 45,000 striking dock workers along the Eastern Seaboard of the United States are in a work stoppage over issues finance chiefs deal with daily. Wage increases and the use of automation are at the center of the negotiations between the U.S. Maritime Alliance and the International Longshoremen’s Association, whose six-year contract expired on Oct. 1.
Though the walkout has been deemed an economic “nuclear missile” due to its estimated $5 billion-per-day cost to the U.S. economy, ILA President Harold Daggett has said he won’t back down. In an interview posted by the ILA before the strike, Daggett threatened a long strike, detailing the economic consequences of a port stoppage.
“Who’s going to win here in the long run? You’re better off sitting down; let’s get a contract and let’s move on with this world,” he said. He had harsh words for the USMX. “In today’s world, I will cripple you. I will cripple you, and you have no idea what that means.”
The technology resistance timeline
Technology is a major reason negotiations between the two parties have soured. After agreeing on dates to begin bargaining for a new contract on May 17, talks were halted less than a month later by the ILA on June 10, when it discovered port and container operator APM Terminals, in conjunction with shipping logistics provider Maersk Line, was using a system to process trucks without union labor. From that point until early September, the two parties couldn’t come to agreement to meet.
That changed on Sept. 23, when the two sides again held talks, ILA said, with wages as the main issue. ILA called the USMX’s offer “unacceptable.”
Separate from wages, the ILA is reportedly refusing to budge on any type of automation that could reduce union jobs over the next six years.
U.S. ports, despite updates to machinery and labor standards, largely operate as they did a century ago. They call for significant manpower and equipment that is mandated by law to be American-built and operated to facilitate and track shipments. While the ILA aims to protect union jobs, its resistance to modernization has resulted in U.S. ports falling behind in both technology and efficiency metrics, critics say. In ports like Shanghai’s Devil’s Dock, which is nearly fully automated, operations require a fraction of the labor force compared to American ports.
Compensation increase demands
Daggett cited profits and the uninterrupted work that took place during the pandemic as key reasons for the above-average wage demand. Though many CFOs planned to offer raises between 4% and 9% in 2024, the ILA’s salary increase demand reflects both the impact of inflation and the benefits of collectivized labor for workers. While the norm would reflect a 24% increase in that time frame (4% per year for six years), the ILA rejected increases nearly double that of almost 50%.
Multiple reports suggest the wage increase the ILA is demanding is 77% over six years. Included in the denied 50% compensation increase package offered by USMX also included a tripling of employer contributions to retirement plans and improvements to health care benefits. Some reports indicate the figure being discussed now is around 62%.
Legal precedent and what CFOs can do
Although he has indicated he has no intention of stepping in, President Joe Biden could suspend the strike using the Taft-Hartley Act. This would require longshoremen to return to work for an 80-day “cooling off” period. In 2002, then-President George W. Bush invoked the act on striking longshoremen on the West Coast. Though it took 45 days, an agreement was reached without a major stoppage.
Presidential power has been used to halt mass strikes in the past. In 1981, President Ronald Reagan fired 12,000 air traffic controllers after they went on strike. They were replaced by the National Guard in the interim and ultimately by new employees. Though President Bill Clinton ended the ban on rehiring strikers in 1993, fewer than 10% of the original strikers were brought back by the Federal Aviation Administration.
CFOs face the challenge of preparing for disruptions to their company’s supply chain and procurement processes. If President Biden sticks to his word and doesn’t intervene, and the USMX and ILA remain in a deadlock over automation use, the stoppage could drag on.
Measuring the efficiency of forecasting will be particularly tough for CFOs as this strike plays out. While both sides have valid technology concerns, using the U.S. economy as a bargaining chip won’t help either side — and it certainly won’t help CFOs trying to execute their end-of-year forecasts. It’s also worth noting that business leaders who have proved they can either fend off unionization efforts or create environments where employees don’t feel the need to unionize may be increasingly valuable to organizations.
