West Coast dockworker talks a tense time

Allen Wastler
One reason dockworkers are well paid

Talks to renew the labor contract for moving cargo through West Coast ports are now under way—and a nervous business world is watching.

"The West Coast ports are critical not only to our members, but to any business, manufacturer, farmer or anyone that relies on imports and exports for their business," said Jon Gold, who oversees transportation issues for the National Retail Federation.

"It's a big deal for everybody," said Bruce Carlton, president of the National Industrial Transportation League, a lobby group for major manufacturers. "So much of what we buy and sell in this country moves through those ports."

Over half of the freight moving into and out of the United States goes through the West Coast. If that traffic stops, then assembly lines halt and retailer shelves go empty.

That happened in 2002, when a 10-day lockout cost the economy upwards of $1 billion a day by some estimates. The White House had to order the ports reopened

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"It highlights how important those ports are to the economy," said Gold.

Indeed, July marks the beginning of the busy shipping season for many importers, as retailers start to fill their supply chains for the back-to-school and holiday shopping seasons.

Source: Pacific Maritime Association

West Coast shipping cargo in large part is handled by roughly 14,000 members of the International Longshore and Warehouse Union. Management, made up of 79 terminal operators and shipping lines, is represented by the Pacific Maritime Association.

Dock work is dangerous. Containers weighing thousands of pounds move swiftly between ship, truck, and rail via high-speed cranes in frenetic fashion. Workers have to climb high stacks of containers, snake heavy duty cables and dodge massive equipment. According to an ILWU analysis, the work is more hazardous than firefighting or police work.

A longshoreman working 1,600 hours a year—two-thirds of the longshore workforce—earns about $123,000, according to statistics from the PMA. Clerks make $147,000 and walking bosses (foremen) make $209,000 for similar kinds of hours. In addition, workers get a benefits package worth about $93,000 a year. (The chart above gives figures for 2,000 hours a year.)

Industry executives say the union is likely less concerned about pay and more concerned about other issues. One is the contract's duration. Traditionally the ILWU-PMA contract covers three years. But after the 2002 lockout, a six-year contract was instituted as a way of ensuring labor stability for a longer time. The six-year duration was renewed again in 2008 as the economy was struggling and stability was again a priority. In the current negotiations, the three-year term is again back on the table.

So is Obamacare. The benefit program for the union is classified as a "Cadillac Plan" under the new national health-care program. That means it could get hit with up to $150 million in taxes, according to the maritime association. The union is likely to argue that management should pick up the cost of those taxes, since employers have historically covered all benefit costs for union members.

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The union is also concerned about job preservation. New technology for handling freight at ports, particularly more extensive containerized cargo operations, often results in the elimination of jobs.

Also, while the union covers the majority of port operations on the West Coast, it doesn't handle them all. Some port facilities dedicated to a particular manufacturer or industrial sector use different union labor, like the Steelworkers or Operating Engineers unions. (Indeed, the ILWU left the AFL-CIO over disputes with other unions about jurisdiction).

For its part, management is concentrating on keeping costs in line, especially after the soft economy of the last six years. Overcapacity has plagued shipping operations all over the globe, leading to price reductions and depressed revenues. In addition, West Coast ports claim they are facing increased competition from ports in Mexico and Canada and even the East Coast as different nations boost infrastructure and global manufacturing centers shift.

Expectations are for the longshoremen to continue working beyond the contract's expiration and for the two sides to come to an agreement by mid-July. With customers pressing for smooth operations in the face of a softly recovering economy and a labor-sympathetic White House, management is disinclined to provoke a fight, observers said. Similarly after six years of a stressed economy, union leadership may be anxious to secure some gains for its membership.

Many point out that that is not a certainty. Management argued that its 2002 lockout was prompted by the union engaging in work slowdowns during the contract talks. Its members walked off the job on May 1, 2008, in protest of the the Iraq War.

For the investment community, there are some effects of a work stoppage to consider. There are a handful of publicly traded shipping companies like Matson Navigation and International Shipholding Group, In addition railroads like the BNSF Railway, owned by Berkshire Hathaway, and Union Pacific have operations tied directly to West Coast operations. (Of course Kansas City Southern, which has a Mexico operation, and Canadian National Railway could benefit.)

But the greater implications are for retail and manufacturing sectors with broad distribution systems relying on smooth cargo delivery. Those that haven't already moved shipments up the schedule would only have two choices if contract talks derail: Divert shipments to alternate ports, which costs time and money, or air freight, which is often cost prohibitive.

Spokesmen for the union and the PMA declined to comment beyond their joint statements.