Port Negotiations Should be About Wages, Skill, and Technology

We have heard a lot about ports and negotiations with workers that recently resolved itself in a tentative agreement. The Pacific Maritime Association and the International Longshore and Warehouse Union set upon some key provisions based on wages and benefits but have not yet completed all of the details. Formal announcements are still in the works. The ports offer an opportunity to understand how wages, benefits, skill, and technology should work together to create win-win situations.

This dispute has been bitter and raged on for over 9 months with the White House having to put pressure on both sides to get things done. Arbitrators were accused of bias and workers are accused of slowing down port operations intentionally. Ships waited over a week to unload their cargo that has a negative impact on economic growth.

Increasing trade over the past decade or so creates more product volume throughout the ports and this can have an impact on national commerce.  Larger businesses are able to weather the port slowdown but small businesses could be more seriously impacted as they need these supplies to keep their fragile operations going. A short delay could put them in the red.

Wages and Benefits are standard negotiation subjects and generally are set through market need and negotiation tactics. Increases in import and export containers have caused increasing demands on workers and wages are part of that process. The implementation of new technology and better infrastructure development could improve these issues.

Contracts last 5-6 years but set a precedence for future negotiations and create an expectation in the mind of employees. Ensuring that the implementation of new technology is part of the expectation is important to avoid  that failure change doesn't result in ports that are less efficient. Wage increases should be based in learning, growth and productivity.

There is no denying that wages in many places of the country have not kept pace with inflation or the profits that many businesses earn. But wage increases should be based in part on the cost of living as well as improvements in skill and ability. Doing so will help ensure that workers market position rises with increases in skill and the better use of technology that ensures ships are unloaded faster and at a lower cost that saves the company money.

Each negotiation should see improvement in worker skill, wages, job security and port efficiency. At least this is the case in theory when an economy is growing. If a middle ground can be found that ensures workers are accepting of training and new technology it lends support to the unions wage case while ensuring the ports are innovative and adaptive. This can be a hard sell when the rhetoric is negative on both sides and finger pointing becomes the predominant logic.

Ports are a fundamental transaction cost for businesses importing and exporting products. Economic growth relies on these ports to ensure products and supplies are making their way to their final destinations. American ports need to stay competitive, reduce costs, and continuously improve. That will require worker populations to grow in productivity, better management of operations and the implementation of new technology to make sure our ports do not slow down the rest of the economy.

2015 Picks Up Employment Steam- Will You Will Be Getting a Raise?

The American economy is picking up steam and zooming forward. According to the Bureau of Labor Statistics the economy added 257,000 non-farm payroll positions in January (1). U.S. Labor Secretary Thomas E. Perez characterizes this employment increase as, "2015 is picking up right where 2014 left off – with strong, steady, sustained job growth that is leading a dynamic recovery" (2).  Great news that could have an impact on future wages but who will be getting a raise depends on market position.

Even though the unemployment creaked up from 5.6 to 5.7% much of this has been attributed to people jumping back into the job market. When people are not searching for work their numbers are not counted. However, as they engage back in their searches and applying the numbers become more accurate as previously unaccounted for people rejoin the statistical measurement. The value of labor is determined in part by the availability of labor; lower unemployment numbers are good.

The jobless rate is different based upon the demographics of the person. Jobless rates for adult men (5.3 percent), teenagers (18.8 percent) adult women (5.1 percent), whites (4.9 percent), blacks (10.3 percent), Asians (4.0 percent), and Hispanics (6.7 percent). Relatively low numbers could mean slack is being soaked up by the market but it will not influence all Americans fairly until labor demand rises more.

Wages and labor supply are integrally tied together and have a long history in historical analysis. For example, a paper out of the Federal Reserve Bank of Atlanta found that wages in high-skill occupations rose dramatically while middle and lower skilled occupations stagnated (Mandelman & Zlate, 2014). Those with higher skill demands in growing industries found themselves obtaining wages raises before others.

If we break labor supply into general and specific we will find where the highest increases of wages are likely to occur.  Those who have obtained specific higher levels of skills/education in advanced industry export oriented companies will see their wages rise substantially as their market supply dwindles. Those in the middle level skill/education will see modest increase while those in low skill/education markets will be the slowest to respond. 

Wage increased are based on economic activity and meeting the needs of the labor market with employable skills. Those who have access to educational opportunities, whether they be skilled labor or degrees, will see higher wages while those who have not obtained new skills will find their wages stagnated. Before low and middle income earners see their wages increase, significant slack will need to be soaked up through increased market demand. Raising earning potential requires a level of investment in the acquisition of new skills through training, skilled trades, experience, and college education.

Mandelman, F. & Zlate, A. (2014). Offshoring, low-skilled immigration, and market polarization. Working paper series (Federal Reserve Bank of Atlanta), 28.

 

Unemployment Lowers and Opportunity Rises-At least for Some

October was a great month for the unemployment rate. According to government data, 214,000 jobs were added last month and unemployment moved down to 5.8%. This is great news for those who are actively seeking employment and are counted in the rankings. Those in the lowest wage rungs haven’t seen much improvement in wages. 

As unemployment numbers decline it naturally soaks up the slack in the labor market. Higher skilled workers usually get the cream puff jobs while lower skilled workers will still be picking up crumbs. Typically higher skilled workers find employment faster because they are needed in penetrating growth sectors of society that rely heavily on education and specialized skills. 

Lower wage service jobs and part-timers will be stuck in lower wages until slack in the market is tighten to create demand-not so easy in a global world. Some lower wage workers may find new training opportunities that help them move into higher paying employment but others may simply stay in lower wage positions unless they actively seek to improve their own skills. 

Eventually wages will rise on all levels of society but inflation may eat up a higher percentage of its purchasing power. For example, people are paid more today than they were 30 years ago but their individual purchasing power has declined. It simply takes more money to live a middle class lifestyle in American today than it did in the past.

What mitigates this relationship is the cost of doing business and the productivity of the American worker. When infrastructure is strong, positive growth policies are enacted, cost of information transference is low, productivity rises, education is reasonably priced then the overall costs of business will be lower. Improving on productivity and lowering the systematic costs in society helps create new employment opportunities.