International Maritime

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ILA wage deal to add at least $ 5 billion in port labor costs

By Michael Angell

The tentative wage deal agreed to between longshore workers and maritime employers along the US East and Gulf coasts could create as much as $ 5 billion in new waterfront labor costs over the life of the next contract , according to estimates compiled by the Journal of Commerce . While a high number itself — other estimates put it much higher — marine terminal operators hope the wage deal will spur greater productivity and efficiency that will help pay for the increased costs .

The agreement struck Oct . 3 between the International Longshoremen ’ s Association ( ILA ) and the United States Maritime Alliance ( USMX ) will provide dockworkers with a 61.5 % increase in the top wage scale over six years , the ILA said in a statement . That was enough to get the ILA to agree to a contract extension that reopened East and Gulf coast ports after a three-day strike at the start of October .

The wage increase comes in tiers of $ 6 per hour in the first year , $ 5 in the second year , $ 4 in the third year and $ 3 per hour over the balance of the contract . The salary hike ,

“ It seems like a reasonable number ... How much revenue are carriers getting each year ?”

though , remains contingent upon both sides negotiating a final master contract by Jan . 15 that covers other thorny issues , including work jurisdiction , automation and coastwide benefits .

Neither side has publicly said what the wage deal would cost the industry overall , and the actual costs depend on many unknowns such as actual hours worked and container volumes handled . However , a Journal of Commerce analysis based on the current growth rate in work hours at East and Gulf coast ports and cumulative hourly raises per year pegged the additional labor costs at an estimated $ 4.95 billion through 2030 .

The estimate assumes work hours at the ports under the ILA master contract will grow at an annual average of 4.3 % over the next six years , the same rate of growth in coastwide longshore work hours seen since 2013 , according to data from the USMX . If that assumption holds true , total work hours would grow to 64.4 million by 2030 , up from 47.8 million in 2023 .

In the first year of the six-year deal , overall wages could increase by $ 312 million . The cumulative raise in the second year would bring wages up another $ 572 million . The third and fourth years add another $ 781 million and

$ 937 million , respectively , while over $ 1 billion in additional labor costs could come in each of the contract ’ s final two years .

The estimate also assumes that the wage increases are paid as straight-time , rather than as overtime hours . Overtime pay can be a significant part of longshore worker income . While the container shipping industry will bear most of the costs , cruise ship and roll-on / roll-off carrier segments will also pay for the higher wages .

‘ A reasonable number ’?

This method is about as good as any for estimating an unknown cost , according to Jason Miller , professor of Supply Chain Management at Michigan State University and a Journal of Commerce analyst .

Miller ’ s own approximate estimate considers the cost of moving a marine container , with that amount assumed to be evenly split between labor costs and other operating and capital expenses . If lift fees are between $ 400 and $ 500 per container , Miller said a 61.5 % rise in wages amounts to anywhere between a $ 125 to $ 150 increase in per-container lift costs .

If East and Gulf coast import volumes hover near 13 million TEUs per year , approximately 7 million containers through 2030 , that translates to anywhere between $ 5.2 billion and $ 6.3 billion in added labor costs , Miller said .

“ It seems like a reasonable number and why the ocean carriers would have been willing to agree to the wage increase ,” he said . “ How much revenue are carriers getting each year for 13 million TEUs of imports each year ?

“ Think about the value of the goods that will be coming through the East and Gulf coasts ,” Miller added . “ That number is getting into the trillions . The ILA wage deal is a relatively small share of that .”

But an executive with the terminal subsidiary of a European-based ocean carrier told the Journal of

16 Journal of Commerce | November 4 , 2024 www . joc . com