The Port Strike Called the Shipping Companies’ Bluff
When East and Gulf Coast longshoremen went on strike last week, their employers claimed to be unable to afford their wage demands. In truth, the shipping industry has seen unparalleled profits in recent years. The strike made them change their tune.
Dockworkers on strike, walking in a picket line outside of the Port of Houston Authority on October 1, 2024, in Houston, Texas. (Brandon Bell / Getty Images)
In a press release issued shortly before International Longshoremen’s Association (ILA) members walked out last Tuesday, the United States Maritime Alliance (USMX) expressed disbelief that the ILA had rejected its latest wage offer for a six-year contract. “Our current offer of a nearly 50 percent wage increase exceeds every other recent union settlement,” the press release said.
While the offer of a 50 percent wage increase did exceed most major recent union contract settlements, the other half of the statement was missing: USMX member companies’ profits over the past five years have vastly exceeded the profits of any other firms that have signed these union contracts.
The ILA knew there was more money in USMX corporate coffers than the company claimed to be able to furnish. So they kept pushing, and on Friday, they won their demand for a 62 percent top wage rate increase over the course of the newly settled six-year contract.
Despite the carriers’ protests, they can very easily afford the wage demand that the ILA ended up winning. Here is a chart showing the operating profits for four of the five highest-volume USMX carriers (excluding COSCO, the Chinese state-owned enterprise).
This profit surge invites comparisons to the United Parcel Service (UPS), which grew nearly 60 percent in just three years, going from $7.7 billion in 2019 to $13.1 billion in 2022. In response, workers demanded a greater share. In 2023, they won wage increases up to 47 percent for part-timers and an 18.1 percent increase for full-time drivers at the top rate over the life of a five-year contract.
But the major carriers’ increases far exceed even that of UPS. The largest carrier in the USMX, Maersk, recorded a 292 percent increase in profit between 2020 and 2021, moving from $8.2 billion to $24 billion. CMA CGM, a French carrier, clocked in at a 538 percent increase, and Japan’s Ocean Network Express (ONE) saw a 475 percent increase.
ILA members clearly deserve a share of these increased profits, but the USMX consistently framed the ILA’s wage demands as excessive. Digging into the numbers a bit more, it’s clear that USMX held out on the ILA with little justification, and that the ILA strike called their bluff.
The Cost of Meeting the ILA’s Demand
Until the new wage increases go into effect, the top rate for ILA longshoremen is $39/hour. Assuming a longshore worker puts in forty hours per week, at the top rate they’re pulling in $81,120 per year. (ILA president Harold Daggett has been at pains to emphasize that longshoremen clearing six figures are putting in significant overtime.) For the frequently cited figure of 45,000 ILA members under the USMX contract (this is the high-end employment estimate, which may be as low as 25,000), that amounts to about $3.65 billion every year in annual base labor costs.
Under the new wage agreement, ILA longshore workers’ wage rate increase will be $6 for the first year, $5 for the second year, $4 for the third year, and $3 per year for the final three years of the contract. Over this six-year period, it’s going to cost USMX $8.89 billion more in labor costs than had longshore workers remained stuck at the $39/hour rate. It’s back-of-the-napkin math, but provided we’re in the general vicinity of what it will cost the USMX member companies, take note of the following: a single carrier member of USMX, Maersk, could have fronted the ILA this money out of its 2022 profits alone — and still have posted a record profit.
The point stands even if you factor in an average of ten hours per week of overtime, which would bring the increase up to $12.1 billion more than if the longshore workers remained at their current rates for the next six years.
If you adjust the increase to reflect 25,000 employees, which the USMX claims is the right number, and include overtime costs, the total increase over the life of the agreement goes down to just $6.7 billion. That’s hardly 18 percent of Maersk’s 2022 operating profits.
If you quoted these numbers to the USMX, no doubt any number of objections would be lodged. For one, the financials listed above are for the company’s entire operations, not just those that involve ILA longshore workers on the East and Gulf Coasts. Profits are also leveling off after the pandemic glut.
But there’s no way around the basic truth here: if a single one of the twenty-three members of the USMX could pay for all six years of the ILA’s wage increase out of a single year of its profit — and, it’s worth emphasizing again, while still posting a record profit — then surely the carriers as a whole can very easily afford the costs of the new contract.
It’s also worth mentioning that while operations along the entire supply chain are cooling off after the COVID-19 bonanza, the new normal is a decidedly larger carrier industry. Here are the revenue numbers for those same four carriers listed above.
In all cases, revenue and profits are down from their pandemic highs, but they’ve settled comfortably well above pre-pandemic norms.
Two Deflections
Throughout negotiations, the carriers deflected by pointing out that the wage increases exceeded other recent major labor contracts, including the 32 percent increase negotiated by West Coast longshore workers in the International Longshore and Warehouse Union (ILWU) in 2023.
What they left out was that ILWU members were starting from a higher position. In 2012, the ILWU and ILA were in a similar position, with top rates on the East Coast at $32/hour and at $34/hour for ILWU members on the West Coast. In 2024, while the top rate on the East Coast is $39/hour, on the West it’s around $55/hour. The ILA wage demands were intended to close the gap, bringing the East Coast longshore workers up to rates comparable to those the carriers are already paying on the West Coast.
The second deflection from carriers was to gesture toward the labor costs of the terminal operators, who technically employ and pay ILA longshore workers. Industry analysts estimate that labor costs for terminal operating can be up to 50 percent. But again, key facts were omitted by the USMX: many terminal operators are subsidiaries owned by major carriers, and even those that are not still have revenues tied to the carrier rates. And port charges only add up to about one-fifth of total operating costs for Panamax container ships (and even less for post-Panamax ships). Peter Olney, the previous organizing director for the ILWU, estimates that labor costs make up about 6 percent of end-to-end carrier operating expenses.
The simple fact is that the money is there, and that there is no drastic trade-off between the carriers’ operating capacities and meeting the ILA’s efforts to achieve wage parity with West Coast longshore workers. There were many issues at stake in the ILA negotiations: automation, pensions, and leverage to organize the remaining nonunion ports in ILA jurisdiction — complicated issues that raise even more complicated questions about the fortunes of labor in the strategic transport sector. The wage demand was not one of them.