Striking Labor Workers…Get Ready for a Double Whammy in the New Year

OK so my timing was off on my last prediction on the port strike – I thought we’d be knee deep in undelivered cargo with ships floating aimlessly in the LA harbor by now….

However, today’s WSJ finally published a story noting that the entire Eastern seaboard is bracing for a strike, with more than 14,500 Longshoreman halting operations.  This includes Houston, New Orleans, Mobile AL, Miami, Port Everglades FL, Jacksonville FL, Savannah, GA, Charleston SC, Wilmington NC, Hampton Roads VA, Baltimore MD< Delaware River Ports PA, Port of New York and New Jersey, and Boston.

The workers have a 90 day contract extension which expires Dec 29….the article notes that the issue at stake is a “container royalty” that companies make to a union fund to “supplement worker salaries”…even though workers at ports are among the most highly compensated blue collar workers in the country.

Perhaps the ILA needs to take note of what happened recently in Ontario, Canada where GM has been shutting down plants at a fierce rate due to lack of productivity and cost competitiveness.  GM which once had 40,000 workers in Canada, now has less than 8000.

The advantage the ILA has is that the ports are immovable… but not replaceable.  With free trade, companies are free to take cargo through Mexico or Canada, which will certainly increase transportation costs.  But cost doesn’t seem to be the determining factor anymore – delivery reliability and flexibility have become key.  And with US port ship loading and unloading times at the lowest rates in the world (almost), it’s hard to make a case that workers need to be paid MORE to improve productivity.

In any case, combined with the lack of progress on the fiscal cliff, there is a good chance the strike will have a double whammy economic effect in the new year shutting down operations and slowing production levels.  Good job guys!  With politicians and unions moving at this rate, we seem to be moving closer and closer to the European model of daily strikes, slow growth, and loss of competitiveness… unless something changes.