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As the International Longshoremen’s Association (ILA) strike enters its second day, President Joe Biden’s administration is under pressure to intervene. However, the administration is sticking to its stance of not invoking the Taft-Hartley Act, which would force dock workers back on the job. This decision reflects the power of unions, but it also risks losing progress on the economy, a top concern for many voters.
The ILA is seeking a significant wage increase, which could have far-reaching implications for the economy. Maritime and business experts warn that persistent wage inflation could lead to higher prices for consumers, both domestically and globally. The impact would be particularly significant for agricultural exporters, who could see their goods become less competitive in the global market.
The ILA’s president, Harold Daggett, is seeking a raise of up to $5 per hour, per year, over a six-year period. The United States Maritime Alliance (USMX), which represents port ownership, has offered a nearly 50% wage increase over six years, but the union has rejected this offer.
While a significant wage hike would be a win for workers, it could also lead to higher prices for consumers. The Federal Reserve has recently been successful in taming inflation, but maritime and business experts warn that persistent wage inflation could undermine these efforts.
The strike has already had a significant impact on the economy, with ocean carriers beginning to take steps to protect their financial position. CMA CGM, one of the world’s largest ocean carriers, has declared force majeure, which would allow it to charge additional operational costs to cargo on the water.
President Biden has said that his administration will be monitoring for any price gouging activity that benefits foreign ocean carriers. He has also called on ocean carriers to withdraw surcharges, saying that no one should exploit a disruption for profit.
The Federal Maritime Commission will use expanded authority signed into law by Biden to ensure that any fees assessed are legitimate and lawful. However, some economists warn that the total number of workers involved in the strike, around 50,000, is a small blip in the U.S. labor market, which employs over 100 million people.
The strike has sparked concerns about the impact on the economy, particularly in the logistics and business trade groups. Executives across the economy are beginning to weigh the potential pricing impacts for their business models.
Acting Labor Secretary Julie Su has said that she is sympathetic to the needs of the business community, but stuck to the administration’s position of supporting collective bargaining for a fair deal for the ILA.
The Federal Reserve has recently become more concerned about the labor market than inflation and has begun cutting interest rates to prevent a rise in layoffs and betting inflation is on its way back to 2%. The upcoming nonfarm payrolls report could include downward pressures in the labor market, influenced by both layoffs related to the strike and Hurricane Helene.
In the longer-term analysis, the wage increase being sought by the union will confirm that wage growth is not going back to its pre-Covid trend, according to some economists. Instead, it could settle around 4%, which would put a floor under inflation.
The strike has sparked concerns about the impact on the economy, particularly in the logistics and business trade groups. Executives across the economy are beginning to weigh the potential pricing impacts for their business models.
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