With a provisional settlement Thursday on the pay component of a multi-year contract between East Coast port operators and dockworkers, the U.S. dodged a bullet — although once closer to a BB gun than a deer rifle.
Edward Lotterman
Yet multiple economics lessons remain relevant here even if the harm this time was minimal. Some are minor but one presages an issue that will dominate coming decades.
Start with the mundane: That shelves in some stores were swept clear of toilet paper on news of the strike demonstrates how “expectations” can “shift” demand for products.
A “demand shifter” is any factor that increases or decreases demand even if the price does not change. There was no lack of TP anywhere nor was any special sale instituted, yet thousands of Americans, perhaps remembering COVID-era supply-chain issues, headed off to buyers’ clubs and big-box retailers to stock up.
Secondly, near-universal access to Internet-based news reporting and to social media have multiplied the speed and intensity with which information, rumor as well as fact, spreads throughout society. In the 1950s, one might read in a newspaper of a major strike but then read nothing else for 24 hours or more. If panic buying resulted in one area, few others would hear of it until the next day. Chain-reaction responses were subdued.
Thirdly, changes in the structure of the labor force have made union activity rare. The port strike made headlines as much because such actions seldom happen as because of any real economic impacts. In the 1950s, a third of all workers were members of unions. On any given day some strike was in progress in every state or major metro area but few made headlines. Only ones with nationwide effects got much coverage.
Now, fewer than 10% of all workers are unionized. Public employees, including teachers, postal workers and state, county and municipal employees make up the majority of all union members. Only 6% of private sector workers are organized.
One result is that reactions to strikes in the news generally trend negative. A slight majority of the population still express support for organized labor. But there is a sharp split between political parties with high levels of disapproval among Republicans versus support among Democrats.
Another result is that national union leadership increasingly is made up of white-collar workers with experience in negotiating and in lobbying and public relations, but with little experience in work stoppages, let alone on the shop floor.
Old-time labor leaders had done manual labor and had gone on strike in the face of violent opposition from employers. George Meany, who in 57 years of union leadership helped create the AFL-CIO and led myriad major strikes, was a plumber. John L. Lewis, the head of the United Mine Workers, had dug coal. Walther Reuther of the United Auto Workers had led strikes against which Ford Motor Co. goons had more guns than SEAL Team Six.
Such leaders personally understood issues of workplace safety and harsh management practices in ways that today’s leaders who are teachers or budget analysts do not.
Another lesson is that the power to extract real wage gains depends on the importance of a few workers in providing a product or service and the “inelasticity” of the demand for it. Dockworkers and railroad employees have power to shut vital chokepoints, thus quickly impacting millions of households and the operations of many businesses. Street maintenance workers or state income tax processors don’t have the same clout.
Federal power to limit strike activity is the flip side of that. The two most important U.S. federal labor laws are the National Labor Relations Act of 1935, or Wagner Act, and the 1948 Taft-Hartley Act. The first, passed by Democrats in the New Deal era, established nationwide rights to organize unions and to strike. The second, passed by Republicans in reaction to a post-World War II spate of strikes, limited rights granted in the Wagner Act. It gave the president the power to impose 80-day periods pausing strikes if such actions threatened to harm the national economy. The older Railway Labor Act already gave similar powers to limit strikes.
So President Joe Biden could have enjoined the dockworkers strike if it had gone on. The threat to the economy was clear, and went well beyond toilet paper. But such a move could have cost him and Democratic presidential candidate Vice President Kamala Harris support among labor-loving Democrats. However, letting the strike go on, with its inevitable supply-chain and consumer-price impacts, could have cost Harris votes too. With one month before the presidential election, the strike was bad timing for the incumbent Democrats either way. The tentative agreement between dockworkers and port operators on pay and the postponement on other issues into the new year was a political gift to both Biden and Harris.
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The remaining issue in this dispute for dockworkers — and the one with the broadest economic indications, both in theory and in the real world — centers on the degree to which jobs for humans can and should be replaced by machines. With rapid adoption of AI looming over us, this issue has major importance.
It is not a new one. In the 1950s, the hot question was whether trains still needed brakemen and firemen even though air brakes controlled from diesel locomotives had been used for decades. The jobs were cut, but it took decades.
Back then, hundreds of thousands of longshoremen were needed to physically wrestle crates, barrels and bales of cargo out of ship holds and into warehouses. Shipping containers did away with the majority of those jobs in two decades. But we still need crane operators, yard truck drivers and operators of straddle trucks and other machines to shift containers around in storage yards. And there still are humans who open and close gates. Port operators argue these are no longer needed. The union wants these jobs maintained. For now they will be.
Loading and unloading large cargo like locomotives and bulldozers will require humans for a long time. But container handling differs little from order picking in an Amazon warehouse. Operating cranes and the drayage trucks that bring containers to and from the cranes could be done with far fewer humans. In time they will be. The issue now is how long the change will take and what the economic fallout will be.
Mining labor boss Lewis was willing to accept mechanization if job cuts could be accommodated slowly via retirements and with higher wages for the jobs that remained. This worked until the expansion of open-pit mines, especially in Wyoming, killed the market power of underground mine owners as well as of miners. Cargo handling does not face alternate competitors of this sort. Ports will continue to trend to fewer workers.
This involves some 40,000 dockworkers. There probably are 40 million other workers whose jobs in any variety of fields might be done through Artificial Intelligence in a few decades, both blue-collar and white-collar. How this will unfold will be the central economic and political challenge of the next decades. The 30-year move from freight train crews of six to crews of two is not a positive omen.
St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.
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