UPS strike could contribute to 'major inflationary pressures': Tom Rogers

Talks between UPS and the Teamster union continue while an August 1 strike date looms. Parcel delivery drivers are credited with saving the economy during the pandemic, but now many fear a labor strike could undo it. Newsweek Editor-at-Large Tom Rogers, who was also the founder of CNBC and the first president of NBC Cable, is viewing the situation from all angles, stating a strike would have an "hugely damaging effect" on the retail sector and adjacent e-commerce companies. Rogers finds that the Biden administration will have to "insert itself" in the middle of these negotiations, much to the dismay of the Teamster union's wishes, without an acting labor secretary.

This post was written by Luke Carberry Mogan.

Video Transcript

- The fight between UPS and the Teamsters Union is still ongoing, with the contract set to expire on July 31, giving the two sides 12 days to negotiate a new deal.

If a contract is not signed, our next guest says the impending strike could leave the economy in a quote, "disastrous direction."

Let's bring in CNBC founder, TRget Media chairman and CEO, and Newsweek Editor-at-Large Tom Rogers to discuss more.

Thank you so much for joining us this morning, Tom.

So talk about the tipping point that's really at stake here with this standoff between UPS and the Teamsters Union.

TOM RODGERS: Well, this is a very touchy issue because we are teetering now in terms of the economy.

Are we going to go into recession, or are we going to have a soft landing?

Chances for the soft landing have clearly improved.

Inflation seems to be being tamed decently.

But the big thing that the Fed obviously has its eyes on is wage increases.

And the pace of wage increases at 4.2% last is something that is still considered too high and the thing that is most likely to trigger more rate increases.

So now we have this thorny labor dispute where the Teamsters and the UPS.

Teamsters probably being the most powerful labor union in the country, and about a third of their members working at UPS.

UPS is a huge backbone of the economy.

They deliver about 20 million ground packages a day, 25% of all of that ground package delivery, something of the scale that FedEx and Amazon just aren't going to be able to absorb if that goes away.

Obviously, that's going to have a hugely damaging effect on the retail sector and the high growth sector of e-commerce only companies obviously being totally reliant on this kind of delivery.

So all of that is pretty high-stakes stuff in terms of consumer impact.

But beyond the impact on the economy and beyond the impact on consumers, this is really something that, in terms of the Biden re-election and Bidenomics, is a very, very touchy issue, but this is just not a typical labor dispute.

The UPS workers at Teamsters Union are very highly paid.

The average full-time driver makes about $95,000 a year.

The more senior tractor-trailer drivers make about $165,000 a year.

That's with no-cost health insurance and about $50,000 a year of pension and other benefits.

So the real issue comes down to the part-time workers at UPS.

And this is where the Union is focused.

These are $20 an hour workers.

There's been a substantial increase through COVID in the number of part-time workers.

These are people who choose to work 15, 20 hours a week, and the Union is seeking something like a 35% increase in their hourly wage.

Now with a Fed focused at a 4.2% wage increase still being too much by way of inflationary pressure, that is really a knock-the-socks-off issue and could really contribute significantly to pressures on the economy, particularly if it's a precedent for other Union negotiations.

And those part-time workers, I might add, get also no-cost health benefits.

And actually, as part-time workers, which is very, very rare, get pension contributions as well.

So that's the backdrop against which this is playing out, but the politics are very intense.

First of all, the administration has no Labor Secretary right now because the nominee for Labor Secretary can't get a hearing in the Senate.

And you need a behind-the-scenes hand here, no doubt.

And the Teamsters don't really want the White House to get involved here, and the Teamsters is extremely supportive of President Biden, and very likely that they'll come out and fully endorse them even though they've been very supportive of him, and his re-election without a formal endorsement.

But the Teamsters have their own politics.

They're getting pushed from the left to call a strike, and that's creating a very, very difficult political situation.

- So Tom, is there a viable path through this then, especially given the delicate position that President Biden would be in?

TOM RODGERS: Well, one would certainly hope so.

I think cooler heads are going to have to prevail.

Somehow, the parties are going to have to get back to the bargaining table.

What's very peculiar here is if the Union strikes.

They are going to send some of that $170 million a day of UPS business that goes up in the air to FedEx and Amazon, both of which are non-Union shops.

So the Union would be sending all kinds of business to non-Union shops.

This isn't like the writers strike or the actor's strike where the entire industry is hurt by what is going on here.

Here if there is a strike, the other major industry players benefit, which is to the detriment of the Union.

I have no doubt that UPS will give some form of meaningful wage increase here.

The issue is the push by the Union for something that really would contribute to major inflationary pressures.

And the White House is going to have to in some way insert itself even against the Union wishes that it not get involved because if this does go to a strike and it really is a push for those kind of wage increases, not to mention the strike impact on consumers, this is just not good for the Biden economy and for the Biden perception of strength among consumers going into an election year.

- So for investors and private companies also that are looking at this situation and thinking, what are the opportunities here to either perhaps push talks forward or have more of a say when you look at this, especially things like wage increases, what role could some of them play?

TOM RODGERS: Well, I think that you have to have everybody beginning to think through what makes the most sense for Union members.

A Biden re-election certainly makes sense, and jeopardizing that would be silly.

Throwing business to non-Union companies doesn't make a lot of sense for a Union job action as well.

I think the idea of lowering the perception of workers by striking in terms of the amount of disruption throughout the retail sector and e-commerce and the $20 million a day of packages.

So I think all the forces that the Teamsters interacts with in the political landscape that can understand what a reasonable settlement is here that avoids a strike which just isn't good for the Union at all because of all those reasons, those forces need to, behind the scenes, help push this along to a more reasonable settlement.

- And suddenly, economically, a lot at stake as you broke down there for us.

A big thank you there to Tom Rogers, CNBC founder, TRget Media chairman and CEO, and Newsweek Editor-at-Large.

Thank you for your time this morning.

TOM RODGERS: Thanks for having me.