Dockworkers Are Guilty of Wage Gouging

Some politicians are blaming the high inflation that has been prevalent for more than three years on corporate greed. They say shortly after the recovery from the pandemic shutdown, corporations saw an opportunity to raise prices extremely high. These politicians refer to this as price gouging.

Labor may be doing the same thing right now.

The problem with high and lingering inflation is that it leads to labor seeking higher wages. The Federal Reserve erred in 2021 and the first half of 2022 by keeping interest rates near zero and by vastly increasing the money supply through their bond buying program.

Those actions coupled with the huge annual budget spending deficits by the federal government allowed inflation to rise to over 9%. The politicians who approved of both the Fed’s policies and the government’s spending policies decided to blame the inflation on corporate greed and referred to it as price gouging.

Even today, despite the inflation rate falling to about 2 ½%, the inflation problem lingers. Often part of the reason is the price-wage spiral. Once inflation rose, labor sought huge wage increases. In other words, labor engaged in wage gouging.

In the summer of 2023, some large labor contracts expired so new contracts had to be negotiated. In California, the healthcare workers from Kaiser Permanente were able to get wage increases of almost 6% per year for four years.

Seeing that, the United Autoworker sought even more in their contract in 2023. They negotiated an immediate 11% wage increase with additional wage increases in each of the next four years. Counting the up-front lump sum for just ratifying the contract and cost-of-living increases, their total package averaged more than a 6% wage increase in each of the next four years.

The auto workers are better wage gougers than the healthcare workers.

Today the machinists at Boeing are on strike. Boeing has offered a wage increase of 30% over four years. That comes to more than 7% per year. Labor turned down the offer, so Boeing management, which had many other problems to deal with, offered 35% over four years. That’s more than 8 ½% raise annually. The workers turned it down.

Now the dockworkers want to further wage gouge. Hourly wage rates vary but most dockworkers earn between $39/hr. to $44/hr. While that translates into about $90,000 per year, many dockworkers earn over $200,000 annually with overtime.

Universal Cargo’s dockworkers earn $39/hr. Their labor has demanded a wage increase to $69/hr. which means a 12% annual increase in each of the next 6 years. That raises the labor cost by 77%.

The dockworkers may be the best wage gougers yet.

This dockworkers’ strike is devasting. Many fruits and vegetables are imported through the ports which are shut down by this strike. Since most of the clothing and textiles sold in the US are produced in other countries, these ports are where those ships are unloaded. Foreign made autos and consumer electronics flow into these ports. And many pharmaceuticals are produced abroad.

It is very difficult to estimate the economic impact of this strike. While we can estimate the value of the goods delivered to the ports where the workers are on strike, the rippling effect is more difficult to determine.

Parts for manufacturers will not be delivered. That means some manufacturers will have to shut down. Large retailers who depend on these goods will not have inventory to sell. If the strike persists, consumers may find fewer goods available for Christmas.

That could be very devasting. On average about 40% of retailers’ sales occur during the fourth quarter. The National Retail Federation recently noted that even a one day shutdown could cost retailers as much as $1 billion.

If management settles this contract for anywhere near the ridiculous demands of labor, the price wage spiral will worsen. Starting last year, many workers citing what the UAW got, demanded larger wage increases from their employers. While rising wages are generally good, wage gouging is very bad for the economy as the increased labor cost will result in higher prices and more inflation.

Dockworkers must be reasonable, regardless of the reasons they give for the high wage demands. Wage gouging is never reasonable.

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