More inflation: A looming strike threatens to drive supply down and prices up

Surveys show inflation remains a top concern for most Americans — and no wonder, with groceries and rent up by more than 20 percent since January 2021.

Now it appears more price hikes and supply-chain problems are coming. Union contracts between East Coast port workers and management expire on Sept. 30, and the International Longshoreman’s Association is threatening to strike.

The 85,000-member ILA is aiming for the West Coast port workers’ 2022 pay increase of 32 percent, plus bonuses and hazard pay. But negotiations with the U.S. Maritime Alliance — a port management organization whose members include Maersk, APM Terminals and MSC — broke off in June due to complaints about trucks using automated gates at the Port of Mobile. While such automation would improve efficiency, no one’s job was lost.

Alan Murphy, CEO, Sea-Intelligence, estimates that a one-day strike would take five days to clear. A week’s strike in October would cause slowdowns until mid-November, and a two-week strike wouldn’t be cleared until 2025. Anticipating East Coast strikes, port volumes in Los Angeles and Long Beach are close to May 2021 pandemic highs.

ILA President Harold Daggett said last year, “If foreign-owned companies like Maersk and MSC try to replace our jobs with automation, they are going to get a painful reminder that longshore workers brought these companies to where they are today…Don’t f--- with the maritime unions around the world, we will shut you down.”

The union's approach has not resulted in improved working conditions and improved port efficiency, in which the U.S. ports rank near the bottom by various metrics.

The ILA timing may be advantageous. The Biden-Harris administration supports organized labor, and Daggett may think that the administration will step in to stop chaos before the election.

The ILA receives over $27 million a year in dues, agency fees and taxes from its members, and it compensates its officers generously, according to Labor Department filings. Daggett’s annual compensation is $855,000, more than three times as much as Teamsters President Sean O’Brien. Daggett’s son, executive vice president Dennis Daggett, earns $468,000, and another top four union officers make over $500,000 annually.

ILA bosses need members’ pay hikes to fund these generous salaries, and it’s understandable that East Coast port workers want the same pay raise as their West Coast brothers. But the rules of economics haven’t been suspended. Workers receiving a 32 percent pay hike should be willing to accept something in return, such as more automation at the ports and other efficiencies, to stay competitive.

Port strikes occur regularly because port workers are under National Labor Relations Board jurisdiction, covered by the National Labor Relations Act. Passed in 1935, the NLRA covers most private-sector employees — including port workers — and establishes employees’ rights to unionize. But the current NLRA system is not designed to ensure ongoing operations when port workers strike, and the National Labor Relations Board’s authority does not cover disputes over expiring contracts or the renegotiation of contracts.

If ports were instead regulated under the Railway Labor Act, signed into law in 1926 to ensure that commerce was not disrupted by labor disputes between railroad employee unions and management, the Biden-Harris administration could set up a Presidential Emergency Board and require mediation.

In 1936, Congress amended the Railway Labor Act to cover airline employees. Another update is in order. Ports are now vital to the economy and should also be covered by the Railway Labor Act to give them the same protections as railroads and airlines.

Labor disruptions at ports are allowed under the NLRA. But the Railway Labor Act would bar them, absent government permission after a long period of mediation. Placing port employees and collective-bargaining agreements under the National Mediation Board — under Railway Labor Act jurisdiction — would ensure that port operations are legally bound to continue during negotiations, just as rail and air disputes are, so that they can be resolved without loss to commerce.

The Port of New York and New Jersey ships about $300 billion worth of goods annually, about the same as the Port of Los Angeles. The Port of Savannah, the second largest on the East Coast, ships over $150 billion. Strikes cause tremendous economic damage, and some shippers and suppliers might permanently reorient their supply chains outside the U.S.

Railroad and airline crews cannot simply decide to stop working. But after the East Coast port contracts expire on September 30, 2024, port workers will be able to strike for higher wages, driving up inflation, and shutting down the nation’s economy. Congress should take another look at this.

Diana Furchtgott-Roth, former deputy assistant secretary for research and technology at the U.S. Department of Transportation, is an adjunct professor of economics at George Washington University.