Hailed by the Teamsters as “the most historic collective bargaining agreement in the history of UPS,” their recently approved five-year contract with the shipping giant is full of wins for the union. It raises wages, creates more full-time jobs and provides long-sought workplace protections for more than 340,000 UPS Teamsters nationally.
Before the contract was ratified, Alan Amling, assistant professor of practice with the Department of Supply Chain Management at the University of Tennessee, Knoxville’s Haslam College of Business, discussed the contract’s potential ramifications for supply chains. In this follow-up Q&A, Amling, who worked at UPS for 27 years, discusses how the Teamsters will leverage this win and what it says about labor’s strength in the U.S.
The Teamsters voted to approve the UPS contract. Did anything about the vote surprise you?
Historically turnout hasn’t been great for the ratification vote, and it’s typically pretty close. I did hear grumbling from part-timers, so I was expecting them to make up a higher percentage of the vote. If the full-time drivers don’t show up in numbers, that could be a problem for the contract getting approved. It turned out, it wasn’t. It passed by an 86 percent “yes” vote. I was surprised by the margin but not surprised by the outcome.
Part of the credit goes to Carol Tome, the UPS CEO. She did something during their August 12 earnings call that was absolutely brilliant. She said that, at the end of the contract, full-time drivers would be paid $170,000 a year in wages and benefits. That created a social media storm where people were saying, “How do I get a UPS job?” That may have had an effect on the vote. The Teamsters said, “Hey, we’ve got a really good bird in the hand, let’s take it.”
What does this win do for the Teamsters’ goals?
The Teamsters have some wind in their sails, and you’re going to see some momentum at Amazon. That effort has already begun. And you’ll see more activity at FedEx, as well. Now, it’s not as straightforward as at UPS, because it’s a little-known fact outside of supply chain that UPS and FedEx are governed under different labor rules. FedEx is under the Railway Labor Act, which considers entities that are part of our national security, because they started out as an airline. It’s hard to unionize under that labor agreement. The UPS is under the National Labor Relations Board (NLRB), which is more pro-labor.
What also makes it more difficult for the Teamsters is that both FedEx Ground and Amazon delivery workers are not considered employees; they’re considered independent contractors. There was a ruling by the NLRB in June that will make it easier to unionize independent contractors, but it still is an uphill battle.
Amazon has 3,000 delivery service provider organizations, which are essentially small businesses that own a piece of Amazon’s delivery network. If 10 or 100 or 500 decide they want to unionize, not only would it not have as significant of an impact on the U.S. economy, but also, it would be easier to replace. Amazon could just start up other delivery service providers. What’s interesting is, around August 19, Amazon revived their third-party delivery service, which they started testing before the COVID pandemic hit.
What is the significance of Amazon bringing back their third-part delivery service?
It means competition with UPS and FedEx and others, using their Amazon logistics to provide services to other small and medium businesses, just like they do for warehousing and fulfillment. The timing of it is not surprising. Two big factors are going on. One is capacity. The reason they killed the program when the pandemic hit is they had no extra capacity. Now, they do. The second thing is, one of the major competitors in the market, UPS, is going to have costs go up substantially.
That creates opportunities for Amazon, FedEx and others to cherry-pick volume from UPS. Even though demand has softened, the rate environment still will be strong, so rates will rise. In the fourth quarter, UPS and FedEx always announce what they call a “general rate increase.” UPS will try to recapture some of those contract costs in rate increases. The question is, in this softer economy, how much of that rate increase sticks? Do they end up losing business? Do they end up discounting away most of that increase? That’ll be really interesting to see.
What does the Teamsters’ contract win mean in a larger context?
We’re seeing a pushback to the widening wealth gap. It’s all over the place. It came to mind last week when that new song, “Rich Men North of Richmond,” went from YouTube to number one on the charts. It’s a song about, “I’m working nine to five, but I’m not the one getting rich.” Not to get into political ideology, but there is a growing resentment over that widening wealth gap and a desire to bring that closer together.
What the Teamsters did with UPS is a microcosm of that. It’s definitely going to increase the wealth of workers. In that microcosm, there’s some balancing. That’s the story the Teamsters are going to take to others, and it goes beyond that. The pilots for FedEx are still in negotiations on their contract. They’re under the Independent Pilots Association, and they rejected their contract. They’re continuing to work on it, and this contract outcome with UPS will have repercussions in that negotiation.
In general, you’re seeing this growing strength in the labor movement. On the one side, it’s going to create some inflationary pressure, but on the other side, it’s going to put more money in people’s pockets that help stimulate the economy. That’s good.
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Scott McNutt, business writer/publicist, rmcnutt4@utk.edu and Brian Canever, marketing content manager, bcanever@utk.edu.