UPS and its union, the International Brotherhood of Teamsters, could not reach a contract in early July. As a result, over 300,000 union members are set to strike if a deal is not agreed upon by the end the month, marking the first UPS strike since 1997. Jason Miller, associate professor and interim chairperson of the Department of Supply Chain Management in Michigan State University’s Broad College of Business, shares insight should a strike occur and outlines potential economic implications.
Responses are excerpts from an article originally published in The Conversation.
What has motivated UPS workers to consider striking?
The Teamsters and UPS have been negotiating a five-year contract to cover around 340,000 union workers, which comes after UPS posted record profits clearing $12.9 billion and $11.5 billion in 2021 and 2022, respectively.
The primary remaining sticking points concern part-time workers. The Teamsters dispute UPS’s claim that part-time workers earn an average of $20 per hour. Teamsters President Sean O’Brien instead says they're paid “poverty wages.
The Teamsters further want part-time workers to have earlier access to health insurance coverage and pension plans and a clearer pathway to full-time employment.
How could this impact consumers?
If unionized UPS workers do go on strike, many U.S. consumers will surely fear delays in the delivery of their online purchases. That is a reasonable concern, given that UPS handles roughly 25% of all U.S. package deliveries.
If a strike were to happen, UPS competitors, including FedEx Ground and the United States Postal Service, would likely be able to handle about 20% of UPS’s deliveries because the industry currently has some excess capacity. That's due to delivery workers clocking fewer hours per week today compared to the height of the COVID-19 pandemic.
If a prolonged strike happens, experts warn UPS could lose up to 30% of its business as customers switch to rival services. The risk of losing market share is leading many industry experts to believe that if a strike were to occur, it wouldn't last long.
How could businesses be affected?
Roughly 57.3% of the packages UPS delivers are shipped straight to consumers. The rest go to retailers and other businesses.
A UPS strike could disrupt the availability of spare parts for cars and wholesale medical supplies, just to name a few essentials. The supply chain for manufacturing computer and electronics products would probably be disrupted too, according to analysis of data from the Census Bureau and the Bureau of Transportation Statistics, which tracks how different industries transport products to their customers.
A strike would leave many businesses scrambling to fulfill customers’ orders, which may force them to spend more money on higher-priced air freight shipping. Disruptions will be most severe for parcel shippers that currently utilize UPS exclusively, as FedEx will prioritize its current customers who take over new accounts. According to economic research firm Anderson Economic Group, even a 10-day strike could cost the U.S. economy an estimated $7.1 billion, making it potentially the costliest strike in U.S. history.
What businesses would be most affected?
The element to emphasizeis not the size of business; rather, it matters whether a business currently has relationships with the U.S. Postal Service and FedEx Ground to handle parcels. The shippers that will be most negatively impacted by a strike are those that currently work with UPS as their sole provider of parcel transportation. FedEx is going to prioritize customers with whom they have existing relations. If a shipper doesn't have a current relationship with FedEx, there is a greater chance that this freight won't fit as well in FedEx's network.
Another thing to consider is that if a shipper uses UPS and U.S. Postal Service but not FedEx Ground, they will be in a bind for parcel shipments larger than 70 pounds, as the U.S. Postal Service isn't well-equipped to handle shipments of this size.
What could be next as the deadline approaches?
Unlike the threatened railroad strikes of 2022, there is no system in place for the federal government to prevent a UPS strike.
However, it seems likely that there will be calls for the White House to get both parties back to the negotiating table. Consistent with this, UPS announced on July 19 that it and the Teamsters will return to the negotiating table prior to the July 31 deadline.
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