What happens if UPS workers go on strike?

WASHINGTON (TND) — American shoppers who are increasingly likely to order things online could start experiencing delays and higher shipping costs if UPS and its Teamsters-represented workers aren’t able to come to an agreement on a new contract.

Negotiators between the shipping giant and the union, which covers more than 340,000 full- and part-time workers at UPS, have been in talks for weeks ahead of the July 31 expiration of the current labor contract.

Millions of packages are shipped using UPS every day, making up a significant portion of the country’s shipping capacity that could be seriously damaged if a strike were to happen. Longer wait times and higher prices are likely scenarios as other shipping companies and the United States Postal Service would be left to pick up the volume.

UPS handles about a quarter of parcel shipments in the U.S., according to the Pitney Bowes Parcel Shipping Index.

Consumers would notice this right away because there's all kinds of stuff that flows through UPS,” said Kevin Ketels, assistant professor of teaching in global supply chain management at Wayne State University. “There is not enough capacity to fill (the gap), so what would happen is a lot of stuff won't get delivered.”

The risk of a strike also comes as the economy is trying to avoid wobbling into a recession as the Federal Reserve works to bring inflation in check and global supply chains are finding the new normal after pandemic-era shocks that disrupted business across the economy.

The latest round of negotiations ended with both sides accusing the other of walking away from the table.

“Refusing to negotiate, especially when the finish line is in sight, creates significant unease among employees and customers and threatens to disrupt the U.S. economy. We are proud of the proposals we have put forward that deliver wins for our people,” UPS said in a statement Friday.

The union said UPS presented an “unacceptable offer.”

"Following marathon negotiations, UPS refused to give the Teamsters a last, best, and final offer, telling the union the company had nothing more to give," the Teamsters said in a statement.

The union has already approved a strike and said its UPS members would not work beyond the expiration of the current contract. Any agreement would have to be approved by the Teamsters’ national committee and be voted on by its membership.

The Teamsters said they want an agreement to "guarantees better pay for all workers, eliminates a two-tier wage system, increases full-time jobs, resolves safety and health concerns, and provides stronger protections against managerial harassment."

For the typical consumer, they would see some effects like longer shipping times. If a strike were to extend into September, retailers could be hit with supply chain snags while they prepare to stock up for the holiday shopping season which could lead to empty shelves in some places.

For the average online consumer, it's going to be Groundhog Day going back to the early days of the pandemic when demand for e-commerce would outstrip capacity,” said Alan Amling, distinguished fellow at the University of Tennessee’s Global Supply Chain Institute and former UPS executive. “Just like during the pandemic, you're still gonna get your goods but perhaps what you were used to getting in a couple of days might be a week or more.”

The Biden administration said it is not intervening at this point in the talks, unlike during the dispute last year between rail companies and workers.

“The president respects collective bargaining and he respects that process. He believes an agreement negotiated between the parties involved is the best possible solution,” White House press secretary Karine Jean-Pierre said Friday. “I don't have any information on increased administration involvement, but certainly we remain in contact with both parties.”

President Joe Biden, who has boasted of his strong support for unions, signed a bill passed by Congress late last year after lawmakers stepped in to block a national railroad strike that would have had devastating consequences for the U.S. economy.

“They would much prefer that this gets settled before they have to intercede,” Ketels said. “But would they open a dialog and force both to the table? You might see that if we're getting very close to the end of the month, a week before they might say ‘OK guys, we've got to figure something out here. We can’t shut down 6% of the U.S. economy.’”

There are more backup options for shipping parcels than there are for large rail carriers, so the effects on the economy wouldn’t be as severe. However, higher shipping costs could add to inflation that has been sticking around for years and make getting it back to 2% more difficult.

“It will exacerbate the issues that were that we're having right now controlling inflation,” Amling said of the economic consequences of a strike.

Economic difficulties could grow if the strike were to linger for weeks, though most experts expect a deal to be reached before that happens due to the high incentive both sides have to find common ground.

UPS CEO Carol Tomé has struck an optimistic tone publicly, telling investors she was confident a deal would be struck before the Aug. 1 deadline.

Amling said he also thought the two sides would reach a deal before a strike takes place.

“I do remain confident. I think odds are better than 50/50 that they will reach an agreement. Just because the leadership of both organizations know that any kind of strike would have a pretty drastic negative impact long term,” he said.