Filling in for Jim Geraghty, I wrote the Morning Jolt today about the tentative deal between the Pacific Maritime Association (PMA) and International Longshore and Warehouse Union (ILWU) at America’s West Coast ports. After 13 months of negotiations, the sides have reached a six-year deal, pending approval by union membership, that includes a 32 percent pay increase.
It’s not yet entirely clear what the agreement says about automation (the agreement is not yet public, and the details we have are from leaks). We know that a more aggressive union proposal about manning requirements for non-automated terminals has not made the final agreement. But there are no indications that this deal is an exception from the general trend: The PMA agrees to higher wages in exchange for piecemeal automation. That’s a recipe for very slow adoption of new technology, which is part of the reason why America’s West Coast ports are so globally uncompetitive.
Let’s consider it from the ILWU’s perspective, though. Is this strategy good for dockworkers?
In one sense, yes. They’re paid extremely well with extraordinary benefits. FreightWaves reports:
Full-time registered longshore workers earned an average of $197,514 in 2022, not including benefits, according to the PMA. Full time is defined as working 2,000 hours or more per year, or 38.4 hours per week. Clerks working full time earned an average of $220,042 and foremen and walking bosses averaged $306,291. (FreightWaves asked the ILWU whether it had any factual issues with the PMA salary data; the union did not respond.)
The PMA also paid $100,534 per ILWU registrant in benefits costs. Benefits include full insurance coverage, a 401(k) and a pension with a maximum yearly retirement benefit of $95,460.
Pay rates above productivity increase the incentive for automation, though. Manual labor and automation can be substitutes. As the relative price of a good increases, demand for its substitute also increases. Demand for automation is already very high, considering the ports’ embarrassing inefficiency and the downstream effects of that inefficiency on the rest of the supply chain. If the ILWU is going to keep playing this game, it would be better to speed the process up and start writing million-dollar checks to pay workers to quit and replace them with the technology we see in Singapore, Rotterdam, and other world-leading ports.
It doesn’t have to be this way. Manual labor and automation can also be complements. The more common path to higher pay elsewhere in the economy is through higher productivity, and higher productivity comes with the adoption of technology. Heavily unionized countries such as the Netherlands and Sweden have managed to modernize their ports with union buy-in partly for this reason. Their unions understand that being globally uncompetitive is bad for their members.
The ILWU itself used to understand that higher productivity is good, as Stas Margaronis wrote for the American Journal of Transportation in April. In the 1960s, the ILWU supported labor-saving innovations, such as containerization. The greater efficiency made dockworkers’ lives easier and raised their pay because employers are willing to pay more for more productive workers. In one negotiation, the ILWU demanded more equipment, but the PMA was hesitant to spend the money. The ILWU ended up winning, forcing the PMA to increase technology adoption.
At that time, the International Longshoremen’s Association (ILA), which represents East Coast workers, stonewalled the adoption of new technology. ILA opposition to technology, along with increased trade with Asia, helped spur the massive growth of West Coast ports. Now, the roles have essentially flipped. The ILA is more accommodating to technology, and the ILWU is more hostile. And the traffic is shifting back the other way.
It’s not just theory, and it’s not just history: The two partially automated terminals at Los Angeles/Long Beach right now have created more opportunities for dockworkers. “Between 2015, the last year before the transition to automated operations, and 2021, paid ILWU hours at the two automated terminals in the San Pedro ports rose 31.5 percent, more than twice the 13.9 percent growth rate at the non-automated terminals,” a PMA study found in May 2022.
Labor contracts are negotiable, but reality is not. The reality is that West Coast ports are inefficient and uncompetitive globally, in large part because they lag on automation. As the ILWU continues to demand exorbitant wages — and apparently at one point in negotiations it was asking for a 101 percent increase, according to the Journal of Commerce — it is only increasing the incentive to automate. The way out of this dilemma is to join the rest of the economy and other major ports around the world in realizing that higher productivity is a good thing.