A United Parcel Service driver sorts his deliveries, on New York's Upper West Side, on July 15. Higher pay is one issue driving strikes among Hollywood writers and actors, and was a focus on the Teamsters union in their negotiations with UPS, which led to large pay gains.Richard Drew/The Associated Press
Gus Carlson is a U.S.-based columnist for The Globe and Mail.
Negotiating guru Chester Karrass said famously that in business as in life, you don’t get what you deserve, you get what you negotiate.
How else to explain the fact that under a new five-year agreement between UPS and the Teamsters union to be ratified next week, the company’s full-time delivery drivers in the U.S. will make US$170,000 in salary and benefits? That’s up from an already sweet annual pay package of US$145,000.
The eye-popping driver pay might make even those who get heartburn over senior executive compensation packages gasp a little. At the very least, it raises the same question: Are they worth it?
If you spin out Dr. Karrass’s logic, it doesn’t really matter what anybody thinks is fair or what some HR guidelines say are approved pay ranges for certain positions. Market forces will determine the value of a job, and smart negotiators know how to leverage those forces to their advantage.
Agree with them or not, the Teamsters did just that. They know very well that with evolution of digital commerce, our strange addiction to having stuff delivered to our homes has become all-consuming and hard to break. The pandemic accelerated that trend, taking home delivery of goods beyond a simple convenience and making it a way of life – and stickier than ever.
If your household is anything like mine, the number of deliveries to the front doorstep each week from UPS, FedEx and other carriers boggles the mind – and that’s not counting services like Instacart and DoorDash.
So powerful has the delivery market become that the threat of significant impact on the U.S. economy – and the ripples that would generate globally – was a strong point of leverage in the negotiations. Had the UPS workers walked out, it would have been the largest single-employer strike in U.S. history. (In Canada, negotiations between the company and the union are ongoing, with an Oct. 3 deadline to reach an agreement.)
And so fearful were consumers that their lifeline would be choked in the event of a strike, UPS said it saw average daily package volumes fall 10 per cent leading up to the agreement, as customers sought other options such as FedEx, the United States Postal Service and regional carriers. That, in turn, fuelled a 7-per-cent drop in first quarter revenues, the company reported this week.
That is why the Teamsters could get so much. Consider just how attractive this union deal is.
Their hefty new payday puts 340,000 UPS employees – about 70 per cent of its U.S. work force – covered by the contract in the same pay grade range as software developers, finance directors and physicians’ assistants, according to Indeed, but without the educational or specialist credentials required for those jobs.
Qualifications for a UPS driving position are pretty light by comparison. Candidates must be able to lift up to 70 pounds, have a valid and clean driver’s licence – a commercial license is not required – pass a Department of Transportation physical exam and be legally allowed to work in the U.S.
That’s pretty much it. Good customer-service and driving skills are also considered a plus, but the company will teach successful applicants the rest through a training program.
In the end, the costs of funding the new agreement will eventually flow to consumers in the form of higher prices. You don’t really think something advertised as having free delivery is really free? The cost is baked in somewhere, usually into the product itself. The same will happen here.
UPS has already flagged the gathering storm. In an earnings call with investors this week, chief executive Carol Tomé pulled back on full-year revenue projections to reflect the costs of the new agreement, which include a promise that all new UPS delivery vehicles will have air-conditioning as of July, 2024.
As consumers, we could be part of the solution and cut back on having goods delivered to our homes to hedge against higher prices. Then again, that would mean we would have to get up from table or the couch, get dressed and go to the store. Who wants to do that anymore?