By the end of the five-year deal that the United Parcel Service and its drivers just agreed to, full-time drivers will make about $170,000 a year, counting healthcare coverage and other benefits. That’s up from $145,000 currently. Quite aside from what those numbers say about the skills of the Teamsters’ negotiators, they are also a testament to America’s prosperity and offer some clues to where its economy may be headed.
US living standards are very high. Given a typical ratio of salary to benefits, UPS drivers might be earning a direct-dollar salary of up to $130,000 in the final contract year. To put that in perspective, Connecticut’s wealthy hedge-fund metropolis, the Bridgeport-Stamford-Norwalk area, has a per capita GDP of about $127,000. If those UPS drivers formed their own city, it would be one of the wealthiest in the US.
In the UK, a city of UPS drivers would be the country’s richest by far, easily surpassing the London metropolitan area. Their city would have well more than twice the average GDP per capita of Birmingham, listed as the UK’s third wealthiest metropolitan area. It’s already clear that US living standards are leaving much of the world behind, and this contract is yet more evidence of that trend. In few places in the world would drivers get anything like this deal.
Compensation for UPS drivers is also well above the median salary for a US engineer. This may herald another trend: rising wages for physical labor, especially if those jobs cannot be done by computers or AI.
The agreement also shows that union bargaining can do well for workers even in sectors with market concentration. By one estimate, UPS ships 37% of express and courier service packages in the US. That is hardly a monopoly, but the company has risen in value in the last five years. Driving many of those UPS deliveries is Amazon, a highly profitable and very large company. In essence, labor is getting its share of some of the rents extracted by technology and logistics networks.
It is all too common to decry the excessive profits of big business and root for higher wages for workers. But in reality, big business is more likely to bring about higher wages.
That said, countervailing forces will limit the distribution of worker gains. For instance, UPS package volumes have been dropping for several quarters, in part because pandemic-induced demand has fallen considerably. So don’t expect UPS to be hiring a lot more drivers, which probably made it easier for it to be so generous.
Going forward, UPS might also be expected to lose some market share. Amazon shipping already has been gaining at UPS expense, and that trend is now more likely to continue. The relevant Amazon workers are not unionized and are paid lower wages. In any case, if self-driving delivery trucks were just around the corner — metaphorically of course — then UPS probably would not have agreed to this package.
UPS can also claw back some of the worker gains by how it rations the driver jobs. Before they can drive, workers first must accept lower-paid jobs sorting and loading packages, a quasi-apprenticeship that can last for several years. That too is economics at work. That upfront deal also might worsen over time. After it was announced, one online jobs board saw searches for UPS driver openings rise about 50%. Higher demand may allow UPS to be pickier about hiring, and to offer lesser terms to loaders and sorters.
In most cases, the union wage premium is between 10% and 20% — not as large as what it appears to be with Teamsters and UPS. That has to be weighed against a lower demand for labor in such jobs, which hurts the working class, and also potentially higher prices for working-class consumers, resulting from the higher wages.
So while the UPS deal is a good one for workers and should be celebrated, it does not violate the basic laws of economics. Most good deals are not quite as good as they look at first, and this one is no exception.
The next time I order something online, I will think about where some of that money is going, and why the rest of US wages generally lag behind. And when the unfailingly polite and able UPS driver delivers my package, I will offer my congratulations.
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