The Signal January 14, 2025

Unions Are Fighting a Losing Battle with Automation 

The latest deal between the International Longshoremen’s Association and United States Maritime Alliance locks in a future where many dockworkers make $200,000 or more per year. But a win for the union’s members could spell trouble for the US economy.

Kevin O'Marah Avatar
Kevin O'Marah

Last week, the International Longshoremen’s Association (ILA) reached an agreement with port operators to avert another strike at US East Coast ports. The central issue was automation eliminating dockworker jobs. For ILA members who had already secured a strike-driven 60% pay increase back in the fall, it’s a clear win. But for the US economy, it may prove to be a pyrrhic victory.  

Extortion Works… For a While 

According to a joint statement issued by the ILA and United States Maritime Alliance, the agreement is a win-win that “protects current ILA jobs and establishes a framework for implementing technologies that will create more jobs while modernizing East and Gulf coast ports.” By striking, first in the middle of peak import season and then again just weeks before Inauguration Day, the ILA has managed to lock in a future where many current dockworkers will make $200,000 or more per year while also adding headcount.  

Both President Joe Biden and President-elect Donald Trump saw political advantage in supporting the strikers. Employers, meanwhile, worried about losing volume to West Coast ports in the short term and shippers’ trust in the long term, also caved.  

Give the union credit: It knows how to play hardball. Unfortunately, the US is still miles behind Europe, Asia, and the Middle East in automating port operations, and this agreement only adds to the cost and complexity of trying to catch up with Singapore, Rotterdam, and Dubai. 

World map showing use of automated cargo handling equipment/annual cargo volume in marine container terminals (selected US and foreign ports as of 2019)
Source: GAO representation of information collected by the OECD International Transport Forum, Dept of Transportation, Bureau of Transportation Statistics Information

How, in a time of rising tariffs, can shippers resist strategies that reduce dependence on US ports for inbound supply or outbound market access? Industrial policies and technology are already driving supply chain localization. This new ILA-USMA agreement could see import-export volumes falling faster than lagging US port automation can catch up. 

Be Careful What You Wish For: A Teamsters Tale 

Back in July 2023, UPS announced a deal with the Teamsters union that would pay up to $170,000 annual compensation for drivers. Management agreed to pony up for workers with a stranglehold on their ability to serve customers while hoping to make up for these higher costs with labor-saving automation in their network of warehouses. In the 18 months since that deal was signed, the company has eliminated thousands of jobs across the US, including many in warehouses in Oklahoma, Colorado, Connecticut, and Maryland, among others. 

The most recent announcement in Portland, Oregon is a planned temporary shutdown meant to allow the installation of new automation. Union officials in the region didn’t respond to questions from The Oregonian on the story, but a Teamsters national vice president in Texas did comment, saying, “Automation is a real thing. There’s only so much we can do to stop progress.”  

He went on to say that sorting machines need care and maintenance and the union had the opportunity to push for a contract guaranteeing long-time employees the chance to train for those roles.     

Sadly, the win for drivers is coming not only at the expense of warehouse workers but also UPS shareholders, who have seen stock drop by 34% while the S&P 500 has risen 27% between July 2023 and today. Most of this loss in enterprise value is due to falling parcel volumes, but the rich deal struck with drivers no doubt reduces management’s choices when dealing with a tightly competitive market. 

Automation and Productivity Beat Job Preservation 

The friction between unions and automation arises whenever technology is intended to improve productivity, which, at least initially, means fewer people are needed for the same output. As political entities, unions resist anything that makes their membership decline, even if it will make everyone better off. 

Old-school job demarcation rules successfully preserved jobs through the 1970s, with total union membership in the US peaking at 21 million in 1979. Unfortunately, this peak coincided with high inflation, high unemployment, and interest rates that stalled growth. In the UK, a similar but even darker version of this dynamic is still remembered as the "Winter of Discontent," when strikes crippled the country.  

The bottom line is that automation, which increases productivity, expands the economy. Unions may grab a bigger slice of the pie for their members, but unless the pie keeps growing, it comes at the expense of others.