East Coast Dockworkers Strike: How Labor Dispute Impacts Economy, Logistics Companies

The labor contract between the International Longshoremen's Association and U.S. Maritime Alliance expired overnight on Tuesday. The ILA — whose members comprise dockworkers on the East Coast — is now officially on strike.

Supply chain disruptions stemming from a prolonged strike may affect several companies and the U.S. economy as a whole.

What Happened: The dispute stems from two fundamental disagreements between the stevedores and port employers.

In their collective bargaining agreement, the ILA proposed a 77% pay raise over the next six years. The USMX countered with 50%.

“Our offer would increase wages by nearly 50 percent, triple employer contributions to employee retirement plans, strengthen our health care options, and retain the current language around automation and semi-automation,” the association said in a statement.

ILA President Harold Daggett urged the USMX to agree to a larger wage increase to address inflation.

“USMX claims to offer industry-leading wages. However, their interpretation of ‘leading wages’ is polar opposite to ours. Inflation has completely eaten into any raises and wages,” Daggett said.

Another fundamental disagreement comes from efforts to automate several port functions.

“USMX is trying to fool you with promises of workforce protections for semi-automation,” Daggett said. “Let me be clear: we don't want any form of semi-automation or full automation. We want our jobs—the jobs we have historically done for over 132 years.”

President Joe Biden told reporters on Monday that he would not intervene in the matter, reiterating support for collective bargaining.

The closure will affect several U.S. ports, including Baltimore, Boston, New York and Philadelphia.

Economic Impact: RSM economist Joseph Brusuelas said the strike implies a modest impact on the U.S. economy.

“Labor action by port workers along the East and Gulf coast of the United States will provide a modest hit to GDP of a little greater than 0.1 percentage points per week or roughly $4.3 billion in lost exports and imports. If sustained that would result in roughly 0.5% percentage points shaved from overall GDP in the final quarter of 2024,” Brusuelas said.

“Given that the American economy is on a 3% growth path at this time, we do not expect the strike to derail the trajectory of the domestic economy or present a risk to an early and unnecessary end to the current economic expansion.”

The economist said the continued operation of ports in the western U.S. would likely lessen much of the strike’s economic impact.

When will the Strike End?: In a note published Monday, Morgan Stanley logistics analyst Ravi Shanker expressed a belief that the strike will end sooner rather than later.

“…in the event of a work stoppage, we believe it is highly unlikely to be prolonged,” Shanker said.

Affected Companies: ZIM Integrated Shipping Services Ltd ZIM, A P Moller Maersk AMKBY, XPO Inc XPO are publicly traded logistics companies likely to be affected by a sustained supply chain disruption.

Walmart Inc WMT and Target Corp TGT, two of the largest U.S. retailers, could face increased supply chain costs and inventory shortages if the dockworker strike persists.

Additionally, an agreement between the ILA and USMX on automation protection would likely affect companies manufacturing the equipment.

ABB Ltd ABBNY and Cargotec Corp CGCBV are among the largest distributors of dock automation technology.

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