Peter Goodman: Beneath the Potential Strike at U.S. Ports – Tensions Over Innovation

This piece is by WWSG exclusive thought leader, Peter Goodman.

Throughout the centuries, as ships have navigated oceans bearing all manner of freight, the companies that operate ports have pressed to limit what they spend on the people who load and unload cargo.

Dockworkers, for their part, have mobilized to pursue a greater share of the bounty through a familiar tactic: They have threatened to disrupt international commerce by going on strike.

Confronted by the militancy of longshore unions, port operators have deployed automation, in part to limit their vulnerability to labor troubles. Not coincidentally, dockworkers tend to look suspiciously at robots and other forms of innovation, divining threats to their livelihoods.

That, in a nutshell, is the history of labor relations on docks from Australia to Britain. And that dynamic is at the center of a contractual impasse now threatening to produce a debilitating strike starting Tuesday at ports on the East and Gulf Coasts of the United States.

Dock workers make no apologies for the wages they command — more than $200,000 a year in many cases, after factoring in overtime. They perform the dangerous and physically exhausting job of moving shipping containers on and off vessels, while keeping businesses and consumers stocked with goods.

History validates their assumption that their bosses are embracing automation in part as a way to reduce costs. The most obvious example is the advent of container shipping in the 1950s.

Before then, the work of loading and unloading a cargo ship was a slow and dangerous process that frequently consumed several days. Dockworkers grappled with three-dimensional jigsaw puzzles while trying not to be crushed to death by shifting freight. They struggled to configure ill-fitting assortments of goods, positioning sides of beef alongside barrels of liquor, drums full of chemicals and bales of cotton.

Unions applied their power over the pace of loading and unloading — or to stop the enterprise altogether — to extract hefty wages.

The use of containers dramatically simplified the process, while reducing the number of working hands needed to do it. Suddenly, cargo could be loaded at factories into standard-size steel boxes that could be carried by truck and by train to ports, and then hoisted atop vessels by cranes.

On the day in April 1956 when local officials gathered at the Port of Newark to watch the departure of the first container vessel, they celebrated a milestone in American industrial efficiency.

But a top official at the International Longshoremen’s Association, the union that represented East Coast dockworkers, looked on in horror, according to newspaper accounts of the day, and said he would like to sink the ship — using an expletive to underscore his point.

That same union is now threatening to strike at Newark and more than a dozen other major ports that collectively handle roughly half the imports reaching the United States. Among the key issues holding up a new contract, which expires on Monday, is disagreement over the pace and scope of automation.

In the decades since container shipping began, union members have been focused on the equation that propels it. When the first ship set sail from Newark to Houston, it cost nearly $6 a ton to load a cargo vessel by hand, according to “The Box,” a book about the history of the shipping container by Marc Levinson. Soon that cost would drop to 16 cents, with most of the savings produced by trimming the need for longshore workers.

Over the last quarter-century, a period of extraordinary global economic integration, the number of workers formally employed in handling American marine cargo has grown to about 64,000 from nearly 41,000, an increase of roughly 56 percent, according to Labor Department data.

But at some major ports that have been automated, dockworkers have suffered job losses, according to some studies.

At a pair of shipping terminals in Los Angeles and Long Beach, Calif., the gateway for roughly 40 percent of imports reaching the United States by container, the addition of automation eliminated nearly 5 percent of roughly 13,000 jobs, according to a report financed by the International Longshore and Warehouse Union, which represents West Coast dockworkers.

Most industry experts view automation as both inevitable and positive. The questions are: Who controls the technology, and will workers be cushioned against changes with training programs that prepare them for new opportunities?

“Innovation changes the way in which the ports and shipping lines are working,” said Ricardo Ungo, a professor in the School of Supply Chain, Logistics and Maritime Operations at Old Dominion University. “This was true when they switched from wind to steam, and later from handling everything by hand to containers. And it will be true when there are new types of innovation in the future.”

Facing pressure on their ranks, the two unions representing American longshore workers have increasingly opposed automation, agreeing to its deployment only in exchange for job protections for remaining members.

Port managers have responded to threats of work stoppages by appealing to those dependent on the continued movement of cargo: consumers, businesses in every industry and workers at companies that rely on parts and products flowing across oceans.

They have brought pressure on successive American presidential administrations to help broker deals to avert strikes by citing the considerable economic damage that results every time cargo slows.

The risk that rising prices for goods could infuriate the public is always an impediment to union action.

If the strike happens, it would impose a fresh barrier to cargo during the run-up to the all-important holiday shopping season, and it would come within weeks of a presidential election that may hinge on economic sentiments.

American business groups have urged the Biden administration to use a 1947 law, the Taft-Hartley Act, to demand an 80-day cooling off period to avoid a strike. They point to data that warns of formidable economic damage — approximately $5 billion a day, or 6 percent of the national economy, according to one analysis from JPMorgan Chase.

Two years ago, President Biden angered union activists in citing a different law to prevent a strike by railroad workers upset by a lack of paid sick leave. But he has proclaimed his credentials as the most pro-union president in history, and he would presumably be reluctant to antagonize labor — a key Democratic constituency.

In his 2022 State of the Union speech, Mr. Biden accused shipping carriers of contributing to inflation, calling them out for having “raised prices by as much as 1,000 percent” and making record profits.

The pandemic produced a surge of orders for manufactured goods that overwhelmed transportation systems. The result was a dramatic spike in shipping prices and floating traffic jams off major ports. The cost of moving a container from China to the West Coast of the United States rose to more than $20,000 from about $2,000 in the space of a few months.

Shipping prices have dropped since then, but a series of shocks have roiled the industry in recent months. The Panama Canal, suffering from a local drought, has limited traffic through the vital waterway. Houthi rebels in Yemen have unleashed missiles on ships headed toward the Suez Canal, a crucial conduit for ships moving between Asia and Europe. That has sent most traffic the long way around Africa, increasing costs.

Between April and June, container shipping carriers took in more than $10 billion in profits, nearly doubling those of the previous three months, according to an analysis by John D. McCown, a senior fellow at the Center for Maritime Strategy.

The dockworkers are asserting claims on a share of the gains as they handle growing volumes of freight.

“Strikes are never easy,” Dennis A. Daggett, executive vice president of the International Longshoremen’s Association, said in a statement this month. “But in today’s world, with labor laws stacked against us and corporate greed at an all-time high, it remains one of the most powerful tools we have in our fight for justice.”