The month of October started with troubling news coming from the US East and Gulf Coast due to the strike of the dockworkers on the United States East and Gulf Coast. The workers are represented by the International Longshoremen Association (ILA), the labor union that counts around 45’000 port workers employed in US ports from Maine to Texas. The strike broke out after negotiations between the ILA and the United States Maritime Alliance (USMX), representing port terminals and container carriers, failed to renew the master contract after its expiry on the 30th of September 2024. It was the first time since 1977 that the ILA declared a strike, and the main reasons were wage increases and automation. To end the strike and avoid devastating consequences to the global supply chain, the parties decided to extend the current master contract until the 15th of January, after reaching a temporary agreement with a 62% pay increase in 6 years. The automation topic remains to be settled. The ILA wants to protect historical job functions, considered a “non-negotiable”, however, port terminals are investing in automated or remotely controlled facilities for example the HHLA Container Terminal Altenwerder or the Nansha Phase IV, as presented last week on our website.
Although the strike only lasted 3 days, and the effects are probably going to be less harsh than expected, it created the perfect opportunity to take a moment to reflect on topics such as automation, labor-management relationships and competitiveness.
On one hand, we have the risks brought by automation, such as job displacement, unloading and loading a ship would take weeks of work of several gangs of longshoremen, handling the cargo as break-bulk while right now ships are served in just a couple of days with a limited number of workers, with automation this will only get worse. Another aspect to consider is economic inequality, we currently see multinational corporations with billions in revenues facing “smaller” opponents, where they can take a dominant position.
On the other hand, the mechanization and automation of labors in port terminals thanks to the containers, cranes, and other equipment, has led to a significant increase in productivity, safer environments, and reduced the need for physically demanding jobs. Moreover, the longshore industry is one of the few examples in labor-management relationships, where the benefit of automation was shared with the individuals whose work was automated away (higher wages, royalties, guaranteed incomes, etc).
All these aspects need to be considered when you want to measure the competitiveness of a port and the economy it serves. Access to a well-functioning and well-connected infrastructure is important for exporters that can now serve a global market as well as for manufacturers and consumers who can now source goods and services globally on a competitive basis. Currently, US ports are not the most efficient, and this is largely due to a lack of automation. If this continues, US exporters will compete with other countries where companies have much more efficient access to global trade and will benefit from it. But I also don’t believe that the sacrifice of a few for the benefit of most is required. Many things can be done to ensure a smooth transition, such as sharing the benefits or ensuring that employers reskill or upskill the workers. Of course, a state intervention will be necessary. In conclusion, automation and its related labor-management implications are complex problems, where many factors are intertwined with each other and there aren’t simple solutions. It will be interesting to see how the negotiations evolve coming to the 15th of January, and the direction that both parties will decide to follow.
