Posted on April 13, 2022
More than 22,000 unionized workers at nearly 30 ports along the West Coast are set to begin renegotiating their contract next month against the backdrop of an already imperiled supply chain, a historically tight labor market and looming midterm elections.
The whirlwind of economic and political factors significantly ups the stakes for the talks, which take place every six years and have in the past stalled traffic at the busiest ports in the U.S. The Biden administration plans to keep close tabs on the talks — and intervene immediately should a breakdown appear imminent.
Even a short-term work stoppage would have major ramifications for the recovery and for Democrats who are already in danger of losing their congressional majorities in the November elections.
“We have to continue to stay focused on the issue,” Labor Secretary Marty Walsh told POLITICO. “The administration and all the folks associated with it are working hard to do whatever we can to alleviate the burden out there.”
Already, Walsh has visited the ports of Los Angeles, Long Beach, Seattle and Tacoma, Wash., where he said he “didn’t see any tension between the workers and the companies.” But he said he is prepared to make another trip west if either the union or the bosses ask him to.
“I offered to both sides: Whatever I can do to be helpful, if needed, with a negotiation,” Walsh said.
With polls consistently showing inflation is a top public concern, another dose just months ahead of the elections would only add to the formidable odds Democrats face. Republicans are pounding the White House and congressional Democrats daily about rising prices.
“Increased inflation will undoubtedly hurt the Democrats going into the midterms,” said Carly Cooperman, a Democratic pollster who is CEO of Schoen Cooperman Research. “Inflation is one of the most important issues to voters right now, and polling shows that many voters blame President Biden and the Democrats for rising prices.”
The current contract between employees represented by the International Longshore and Warehouse Union and employers represented by the Pacific Maritime Association expires July 1. It covers workers at 29 West Coast ports, the majority of whom are based at California’s Long Beach and Los Angeles harbors — which handle almost 40 percent of U.S. imports.
“Both sides understand what’s at stake economically,” said Gene Seroka, executive director of the Port of Los Angeles. The ports “represent about 12 percent of our GDP.”
Because such a high volume of cargo passes through the workplaces involved, even the smallest hiccup in operations could have a dramatic ripple effect. The last time both parties were at the bargaining table in 2014, talks dragged on for nine months — creating a multi-ship backup and costing retailers millions.
It took an eleventh-hour visit from former Labor Secretary Tom Perez to finally broker an agreement. Some of those involved today anticipate Walsh will likely need to do the same.
“What’s been told to me directly from the administration, including Cabinet members and others, is that if we veer off course a little bit, I don’t see the administration hesitating one bit to help bring the sides together to reach a conclusion,” Seroka said.
Economists warn that while the financial toll of increased congestion is always great, the state of the economy right now means similar delays would hit much harder. Already, employers are facing much higher shipping costs due to supply chain issues stemming from the pandemic and the conflict in Ukraine, which they have been passing on to consumers in the form of higher prices.
“Supply chain issues are largely responsible for the inflation that we’ve seen in the goods market,” said Julia Pollak, chief economist at ZipRecruiter. Shipping costs are “exactly why we’re seeing such high inflation in some of those categories.”
Retailers are paying 600 percent more on shipping than they did pre-pandemic, Pollak said — and at the same time, coping with delays in delivering merchandise that are driving away customers. That has led to the highest prices in decades: They were up 7.9 percent in February 2022 from the same period in 2021, according to the Bureau of Labor Statistics.
“We usually fly under the radar as an industry,” Seroka said. But the state of the economy “now shines a particularly bright spotlight on these negotiations.”
Pollak said that a work stoppage would initially impact the businesses moving imports through the ports, rather than the employers and workers directly involved in the negotiations. As a result, she said, the higher economic stakes won’t put greater pressure on those at the bargaining table to reach a compromise, at least initially.
“If the employers fail to come to some kind of resolution — and business owners again face inordinate delays and chaos and disruption, messes and whatnot — the [port] companies involved are not going to face the full financial consequences of any delay,” Pollak said. “The costs will ripple out to all kinds of other parties and the companies with the greatest power to solve the problem have no incentive to do so.”
On top of that, a historically tight labor market means that the union has more bargaining power than possibly ever before. There were 11.3 million job openings in February, per BLS, and just 6.3 million unemployed workers.
“We are in this white-hot labor market; the tightest labor market ever,” Pollak said. “When you have such great outside options, you don’t need to settle for anything less than what you want.”
That’s exactly what ILWU appears gearing up to do. Union president Willie Adams already warned workers on the podcast “The Docker” in 2020 to save money because “there may be a battle in 2022.”
Not only do port workers continue to risk exposure to Covid-19 — and with a much higher burden of proof to earn workers’ compensation due to illness, which congressional Democrats are attempting for the third time to address — but they also are handling more cargo than ever before, Adams told POLITICO.
“The past two years have been unlike any other time in the history of the ports,” Adams said in a statement. “At the start of the pandemic when most of the country was under shelter at home orders, ILWU dockworkers continued to move cargo to ensure that PPE [personal protective equipment] was accessible, medical supplies were delivered, and our store shelves stocked.
“As consumer demand for goods went through the roof and more containers started to arrive at our ports at historic levels, ILWU dockworkers continued to move cargo at record-breaking rates.”
The Pacific Maritime Association, for its part, is mindful of the economic ramifications of any delay: “A slowdown … will resonate in every segment of the economy — from the government to the retailers to the public in general, because they are now well aware of where cargo comes from — [and] will get a lot of attention very quickly on the eve of the midterm elections,” PMA President Jim McKenna said.
“There will be a lot more scrutiny, a lot more pressure, and a lot more excitement if it is even thought that something is going awry,” McKenna said. “This is my fourth negotiation: We’ve seen a lot of things, but this is certainly the first one that has a groundswell in front of the negotiation, versus in the middle or toward the end.”
Seroka said he expects that the talks will drag on past the contract’s July 1 expiration date and “into the months of July and August.”
“I’m not going to get too nervous,” he said. “Traditionally, both sides go a little bit deeper past the completion of the current agreement to make sure that they get all the bargaining points across.”
But if negotiations go much longer than that, the economic consequences would deal Democrats a tremendous blow right before November’s elections. The three midterms since 1950 that coincided with a dip in real income — or a decrease in wages when factoring in inflation — ended poorly for the president’s party, an analysis by University of Denver professor Seth Masket found.
“Unfortunately for the administration, they’re in the center of the bullseye,” said William A. Galston, a senior fellow at The Brookings Institution who has studied the politics of inflation. “The administration has a huge stake in warding off a work stoppage at the ports.”
One in five Americans cited inflation as the most important problem facing the U.S. in March, according to Gallup. That’s the most that the polling firm has recorded since 1985 — and coincides with President Joe Biden’s lowest approval rating yet.
“Nobody wants a work stoppage or a slowdown,” Walsh said.