Labor Win Could Affect Economy

Organized labor, battered by decades of declining influence, scored a big victory with the tentative settlement in the Teamsters strike against United Parcel Service. However, the deal could create some inflationary pressures on the economy, and sends a signal that management may not be fully able to deploy workers as it sees fit.

But whether American business suffered a long-term defeat, and lost leverage in battles with organized labor, will be subject of debate. The UPS situation, some experts argue, is atypical in that it was hard for the company to replace its vast number of highly skilled workers. In other industries, where striking workers are easier to replace, management may still hold the upper hand, analysts say.

Teamster President Ron Carey on Monday night boasted that “workers were on the run, but not any more. This strike marks a new era.” The settlement resulted in significant concessions to the union on the key issues of part-time labor and pensions.

UPS management declined to state an opinion of the settlement. But economists speculated that the combination of having to promote part-time workers to full-time schedules, with pay raises for all workers, could set off a round of wage and cost pressures in the U.S. economy.

“This means there will be cost pressures from the wage side that we haven’t seen in this expansion,” said Larry Kimbell, director of the UCLA Business Forecasting Project.

Clearly, UPS management has suffered a setback. The union prevailed on its key demand that UPS, which employs more than 100,000 part-time workers, upgrade thousands to full-time positions.

Also, the company shelved its proposal to withdraw UPS pensions from the Teamsters multi-employer pension plan--a proposal the union adamantly opposed.

The labor victory sends a powerful signal to companies and employees throughout the economy, where part-time work has increased in recent years, helping companies score gains in productivity and profits.

“The most important upshot is that management doesn’t have as free a hand to do whatever it wants to do to its employees. Now it has to calculate the costs of labor pushing back,” said Geoffrey Garin, president of Peter D. Hart Research, which conducts polls for union and Democratic causes. For workers, the strike settlement dovetails with a labor market with low unemployment and a scarcity of workers for some jobs. At UPS and elsewhere, “we’re going to see improving settlements for workers, with some rise in wages. There have been very strong gains in profits [for companies], but there haven’t been strong gains in wages,” economist Kimbell noted.

Whether rising costs of labor would set off rising inflation remained a question after the labor victory. Stock and bond markets today will register an early reaction to the settlement. Given financial markets’ fears of wage and cost pressures, that reaction is likely to be negative.

However, in the larger sense of the “Main Street” economy, beyond Wall Street, the settlement could provide a boost to consumer confidence. “In general, this should reassure people,” Kimbell said. “Now it’s not just that the unemployment rate is low, but there’s also a prospect for better jobs.”

The 15-day strike proved a turning point in many ways. Just as the crushing of the air traffic controllers strike in 1981 signaled an era of corporate restructuring and labor retreats, so the UPS settlement may presage a period of growing strength for union members and other workers.

Notably, the Teamsters enjoyed broad public support in the UPS strike. A poll released Friday showed 55% of Americans siding with the strikers, versus 27% backing the company. Although the cost of strikes normally is punishing to labor and management alike, this will encourage some more unions to walk out to win their demands.

As much as labor won at the bargaining table, it also scored a significant victory with the public in making its point that many workers want full-time, not part-time, jobs. However, a sizable number of people--including retired persons, homemakers and students--often welcome flexible schedules and the work of many businesses demand that people work odd hours.

Still, part-time workers earned lower wages than the company’s full-time employees and that fact rankled employees enough for the union to elevate it into one of its pivotal strike issues.