The UPS Strike

The UPS Strike

E-mail debates of newsworthy topics.
Aug. 15 1997 3:30 AM

The UPS Strike

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Dear Tom,

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       Apart from the politics of the situation (including the apparent high value placed on a victory in the confrontation by the larger labor movement), the interesting issues involved in the present UPS-Teamsters strike seem to me to be: 1) the pension plan, which is a straightforward problem; 2) control over part-time jobs, including the possibility that part timers and full timers might be fighting one another within the union; 3) whether the union is truly acting as the agent for the members, or if union leaders are seeking one goal while the rank and file pursue another; 4) what ought to affect the decision to invoke the Taft-Hartley Act.
       Let's start with the adequacy of the UPS pay package and a few pertinent facts.
       Driver wages, adjusted for inflation, have allegedly increased by only 2.8 percent since 1989. But the inflation adjustment is flawed, being calculated using a biased Consumer Price Index. The real wage gain, based on an unbiased index, is closer to 12 percent or 13 percent. The press reports that the contract on the table raises wages by a dollar-and-a-half an hour over the next five years.
       We might ask several questions. 1) Can UPS afford to pay more? 2) Is the wage hike sufficient to attract and retain qualified workers? 3) Can a UPS employee earn enough under this contract to achieve a satisfactory standard of living?
       Wages account for around two-thirds of labor costs. The remaining third are outlays for fringe benefits, retirement, training, and hiring. An employer's ability to pay depends on whether the wage hike can be passed on to customers or offset by productivity gains. There are no barriers to entry into the package delivery business. UPS can maintain its dominant market position only by supplying a superior service at a reasonable price. The U.S. Postal Service, Greyhound, Airborne, Federal Express are waiting for a slip.
       How does the UPS offer compare with the wages paid by its competitors? We really ought to be comparing total pay packages that add in the value of health insurance, time-off benefits, pensions, etc. Personnel turnover rates are a good indicator of the adequacy of the employer's pay package.
       We are told that a full-time UPS employee earns just under $20 an hour, and if he puts in about 10 hours of overtime per week, he realizes $22 an hour, or around $55,000 a year. If we consult the latest data collected by the Bureau of Labor Statistics on the World Wide Web, employees in the private sector earned an average of $12.41 an hour in July 1997, or around $25,000 a year. The higher hourly wage, along with longer hours each week, means that the annual earnings of a full-time UPS driver are more than twice as much as the average for all private-sector workers: men, women, full- and part-time workers. Wages of $55,000 a year, plus health insurance and pension benefits worth at least another $15,000 a year yield an annual income which puts a UPS employee in the top 25 percent of all wage and salaried employees.
       What about the part-time UPS employees? They allegedly earn about $11 an hour, which is below the economy-wide average of $12.41. We do not know how many hours they put in. Some work split shifts and may work as many as 48 hours a week, including weekends. There is reason for an outsider like me to suspect that the interests of the part-time employees may be quite different from the aims and aspirations of the full-time workers. We could get an inkling about the solidarity of the desires of the rank and file by looking at the characteristics of the union members who choose to cross the picket line. It looks to me like the wage offer is fair. I'd like to hear your views on this as well as the other aspects of the contract.

Walter Y. Oi

Thomas Geoghegan is a labor lawyer in Chicago. He is the author of Which Side Are You On? Trying to Be for Labor When It's Flat on Its Back. Walter Oi is the Elmer B. Milliman Professor of Economics at the University of Rochester.