In one week, unionized workers at UPS will walk out if a labor agreement isn’t reached — an action that would have major economic consequences.
UPS and the Teamsters union have been in contract negotiations for months, with the union overwhelmingly voting to strike if a deal isn’t inked by July 31. Now, with just days left, economists are starting to gauge just how damaging a walkout would be. It's crucial, though, to note that UPS remains confident a deal will be reached in time.
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To understand just how damaging a UPS strike would be, the scale of the situation must be put into perspective.
Some 6% of the country’s gross domestic product travels through UPS — a massive amount. The UPS and Teamsters labor contract also represents the largest private-sector union agreement in North America, and if there is a strike, it would be the biggest strike for a single employer in United States history.
“High level, the effects would be pretty significant,” Sean Higgins, a research fellow at the Competitive Enterprise Institute who is an expert in labor and employment issues, told the Washington Examiner.
A strike of even just a matter of days would cost the economy billions of dollars. A recent analysis by Anderson Economic Group found that a 10-day strike would cost the economy more than $7 billion. That would be the most expensive strike in at least a century.
Such a strike would likely result in about 340,000 workers being furloughed, resulting in wage losses of more than $1 billion. UPS customers would incur losses of more than $4 billion as a result of a 10-day strike, according to the research.
Higgins said that, given UPS’s massive share of the country’s GDP moving through it, it would represent one broken link in the supply chain, one that would ripple out and have a profound effect on other parts of the supply chain.
One such knock-on effect would be issues with the delivery of critical medical supplies and other essential items that would be at risk from a protracted UPS strike, according to AEG analyst Shay Manawar.
“In addition to having potentially severe consequences for those who need these supplies, this sort of interruption in service could prove very costly due to required intervention and emergency medical services,” Manawar said.
There are also lessons to be learned about the compounded effects kinks have on the nation’s supply chain from the supply chain crisis in 2021. For instance, back when ports in Los Angeles were clogged, it caused a ripple that led to shipping crates piling up, creating a further labor problem of where to put all the delayed units.
“It only takes one of these links to break and the whole thing to unravel and just sort of collapse and fall apart on its own,” Higgins said, adding that the longer a potential strike goes on, the more compounded the supply chain issues become.
In the event of a strike, competitors like FedEx would work to cash in on UPS’s lost business and try to pick up the slack. But given the sheer magnitude of goods that UPS moves, it would be impossible for the competitor to completely make up for the loss in the market.
FedEx has also already been preparing for the possibility of a UPS strike, according to an internal company memo reviewed by NPR. The memo said that FedEx is encouraging shippers to “begin shipping with FedEx now” in advance of the deadline, although it acknowledged that it wouldn’t be able to keep pace, given the scale of the disruption.
“In the event of a market disruption, no carrier can absorb all UPS volume,” FedEx executives wrote earlier this month.
Dan Bowling, a distinguished fellow at Duke University School of Law where he teaches labor and employment courses, told the Washington Examiner that small goods might not fare too poorly due to UPS’s competitors picking up the slack. But the big negative effect of a UPS strike would be on the shipment of large manufactured materials like equipment, which would start to drag on the economy.
But he also said that just because a strike is initiated, and some 97% approved it in the union vote, it doesn't mean that all of the workers will end up walking out in protest because they aren’t compelled by labor law to do so, though they will be pressured to by the Teamsters. Still, he doesn’t expect that number to be significant.
When contacted for this story about the economic implications of a strike, a UPS spokesperson pointed the Washington Examiner to a letter from a coalition of organizations, led by the U.S Chamber of Commerce, that was shared with the White House encouraging intervention.
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“A Teamsters strike against UPS could be the costliest such strike in at least a century,” the letter reads. “One study estimates that a 15-day UPS strike would harm the health and safety of U.S. consumers by $55.5 billion; even a 5-day strike at UPS, by this account, would harm the country by $15.8 billion — or $3.7 billion per day.
“Given the debilitating impact of a strike on American families and the economy, we urge your Administration to provide the support necessary to help the parties reach a new agreement by the August 1 deadline,” the letter said.