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If the market doesn’t sustain the kind of jobs they want, how will striking help? Striking can definitely backfire. How many UPS customers will ship with other

If the market doesn’t sustain the kind of jobs they want, how will striking help? Striking can definitely backfire. How many UPS customers will ship with other companies during the strike? How many of them will stick with their new choice and never come back to UPS? When a market gets disrupted like this, the worst thing the incumbents can do is refuse to accept change and double down on their old model. They need to innovate and change. I know that’s not easy, but it’s the only thing that works.

djrobstep 4y ago
The market is not being "disrupted" in any genuinely innovative sense, the employees are merely having their bargaining power undermined. The real solution here is sectoral collective bargaining: https://en.wikipedia.org/wiki/Sectoral_collective_bargaining https://en.wikipedia.org/wiki/Sectoral_collective_bargaining
- eru 4y ago
  Why is that a solution? If people don't want to work for UPS at the conditions and wages that the market can bear, they can move jobs. It's good for people to be able to enjoy cheap shipping.
  - djrobstep 4y ago
    The conditions and wages that the market can bear aren't some physical universal constant that exist in a vacuum - they are a product of labor market laws and regulations. > It's good for people to be able to enjoy cheap shipping. Yes, that's why sectoral bargaining laws are so important - they force firms to compete on genuine innovation and efficiency, rather than undercutting pay and working conditions.
    - _skel 4y ago
      No amount of laws and regulations will make it possible to sustain jobs that the market participants are not willing to pay for -- not unless the government starts paying the wages of employees at uncompetitive firms to keep them from losing their jobs.
      - djrobstep 4y ago
        Did you even read what I just wrote? Package delivery still exists in countries with sectoral collective bargaining. No government payments are involved - all that's different is industrial bargaining laws. The companies are competitive - they just compete on actual efficiency rather than undercutting worker pay and conditions.
        eru 4y ago
        What do you mean by 'actual efficiency'? Whatever companies in an economy with sectoral collective bargaining can do to cut costs and increase revenue is also available to companies in economies without sectoral bargaining.
        djrobstep 4y ago
        It might be "available" but the focus and outcome will be different. Suppose there are two delivery firms: - Firm A develops innovative delivery routing software that cuts delivery costs by 20%. -Firm B is rubbish at software, but really good at underpaying workers and getting away with it, such that they reduce costs by 30%. Without sectoral collective bargaining and stronger labour rights more generally, Firm B will win. But the better outcome for workers and efficiency is for A to win.
        twblalock 4y ago
        Firm B would be pretty easy to compete with, because it would end up with the worst human capital out of all of the firms, and a firm with better people would find a way to add value that Firm B could not. Amazon is definitely not Firm B, although I suspect that is what you were driving toward. Amazon has invested more in being competitive than any other company it competes with in almost every area, and despite the nonsense you read in the media, it offers above-average pay and benefits in the industries it is involved in. Despite that, all warehouse and delivery jobs suck and are dangerous, but that says a lot more about those jobs than it does about the company.
  - nerdponx 4y ago
    > they can move jobs If they could, they would.
    - eru 4y ago
      https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE
      - nerdponx 4y ago
        Humans are not ideal gas particles bouncing around in a frictionless canister. Aggregate unemployment rate says very little about the difficulty of finding stable work that pays enough to support a small family, or of the high switching costs involved generally with changing jobs.
        eru 4y ago
        Sure. The aggregate data says that in aggregate 96.5% of people who want a job, have a job.
Spooky23 4y ago
Amazon isn’t disrupting UPS. They’ve sunk billions to try and smooth out the slowdown in an e-commerce business that is a boat anchor on the real money machine - AWS.
fatneckbeard 4y ago
Amazon does not make money shipping products. they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to eliminate competition by taking a loss on every single other part of their business. thats not really what is meant by a free market.
- eru 4y ago
  > they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to eliminate competition by taking a loss on every single other part of their business. That kind of subsidy of the average American would be very nice of Amazon. Alas, it's highly unlikely. See https://www.econlib.org/library/Columns/y2017/Hendersonpredatory.html https://www.econlib.org/library/Columns/y2017/Hendersonpreda...
  - TheCoelacanth 4y ago
    You can't refute something that is actually happening based on economic principles. Your theory has to match the data, not the other way around. This is the equivalent of saying "that plane isn't flying because gravity holds things down".
  - nerdponx 4y ago
    > But Firm A now has a tough problem. If it sells for anything more than $5, another competitor might enter. There is no reason to think that another competitor couldn’t match the $5 average cost. And there is some reason to think that its cost could be lower than $5. Why? The new competitor could buy Firm B’s assets at fire-sale prices, thus reducing average cost. Ah yes, the mythical world where the assets of an enormous but deteriorating corporation are just sitting around on a shelf for purchase by any plucky entrepreneur with enough vision, bootstraps, and good old American sack, who will of course be able to restart the whole enterprise immediately, and, having purchased the whole thing on the cheap, will have so greatly reduced average cost that they can immediately call the predator's bluff and restart the same price war, this time with the upper hand and victory in sight. Of course this argument makes no sense except in a world of spherical cows and perfectly rational actors. The more plausible argument against Amazon operating their logistics business at a loss is the obvious fact that they have invested enormous resources into squeezing efficiency out of their logistics business, to the point of being now-infamously abusive of their delivery drivers and warehouse staff. Keeping marginal cost as low as possible clearly matters a lot to Amazon management. What's more likely is that they have invested in keeping marginal cost down specifically in order to run their logistics business at a very small but positive margin and still compete on price in order to establish and maintain dominance and high volume. Don't forget that they are also skimming value off of several points in the e-commerce lifecycle, basically at every point except actually charging customers for shipping, but that's probably more than offset by all the Prime accounts that people renew every year but never get their money's worth out of. Then again, this is just speculation. I haven't actually looked at their financial statements, and maybe someone with more finance expertise can weigh in on whether there's anything more to be learned there.
mdasen 4y ago
I think their argument is that the market will sustain those jobs. UPS's earnings are up around 8.5% year over year and UPS has been doing consistently better than FedEx with the same revenue and employee headcount. There is danger with a strike, but it might be more limited than you've suggested. Yes, companies will try and keep shipping things with alternatives during a strike. Yes, some might want to stay with that alternative. However, there are two complications with that. First, I don't think people will decide to boycott UPS because they had a strike. I think shippers want to minimize their costs, not punish a shipper because they had a strike. Companies aren't going to pay FedEx more just because UPS had a once in a generation strike (and it looks like that last one was in 1997, 26 years ago). Second, do competitors have the capacity to pick up the slack? Yes, companies can expand over time, but they probably can't for the duration of a strike. Amazon started shipping its own packages years ago and is still UPS's largest customer. Amazon can't just scale up operations overnight and they're Amazon. I'm sure that FedEx, Amazon, and LaserShip/OnTrac will make a play for marketshare, but if they're able to get a reasonable contract, I don't think others will be able to move fast enough to really take marketshare in the short term. Now, if the contract puts UPS at a big disadvantage over the long-run, their marketshare will simply dwindle. However, as it stands, FedEx and UPS are making similar amounts of revenue (UPS is around 7% higher), but UPS is often making 2-3x the profit. Trailing 12 months: $10.2B vs 3.5B. 2021: $9.4B vs 5.6B. 2020: $5.1B vs 1.6B. 2019: $5.6B vs 0.8B. 2.9x more, 1.7x more, 3.2x more, 7x more. That's a nice run of much higher profits while having only marginally more revenue. It kinda looks like UPS has a good business model and that the union wages haven't been a hinderance to that model. UPS is valued at 3.2x more than FedEx despite having the same revenue and UPS's P/E ratio is actually a tiny bit lower - 14.24 vs 14.86. People are paying over 3x more for UPS stock because they're making great profits that justify being worth $157B to FedEx's $48B. Wall Street isn't the kind of place where they're going to love your stock because you're a union shop - probably the opposite. However, they do like the profits that UPS is bringing in compared to FedEx. Yep, my instinct was that UPS's fundamentals would be bad compared to newer and non-union shops. Turns out that they're making money way better than their main rival with better margins. It's surprising, but I'd say there's money for the union to go after. I'm not saying they can have unlimited demands, but if UPS is earning 2-3x what FedEx is on the same revenue, there's room for improvement in salaries. Even if the workers take only half the difference between UPS and FedEx and we look at the worst delta between the two since 2019 ($3.5B in 2020), we're talking $1.75B. Divide that by the 250,000 union workers and that's $7,000/year in more money. Even if we're talking about the 500,000 global workers, that's still $3,500/year. If UPS is looking at more expansion in the next few years (which seems likely), maybe the union can go for a bit more. Note: this isn't talking about bringing UPS down to zero profit. This is about bringing UPS down to 1.5-2x FedEx's profitability rather than 2-3x. With increases in package volume, maybe UPS could be back to 3x FedEx toward the end of the contract. UPS's business just looks strong. They have a similar employee headcount as FedEx and similar revenue, while having way better profits.

djrobstep 4y ago

The market is not being "disrupted" in any genuinely innovative sense, the employees are merely having their bargaining power undermined. The real solution here is sectoral collective bargaining: https://en.wikipedia.org/wiki/Sectoral_collective_bargaining https://en.wikipedia.org/wiki/Sectoral_collective_bargaining

eru 4y ago
Why is that a solution? If people don't want to work for UPS at the conditions and wages that the market can bear, they can move jobs. It's good for people to be able to enjoy cheap shipping.
- djrobstep 4y ago
  The conditions and wages that the market can bear aren't some physical universal constant that exist in a vacuum - they are a product of labor market laws and regulations. > It's good for people to be able to enjoy cheap shipping. Yes, that's why sectoral bargaining laws are so important - they force firms to compete on genuine innovation and efficiency, rather than undercutting pay and working conditions.
  - _skel 4y ago
    No amount of laws and regulations will make it possible to sustain jobs that the market participants are not willing to pay for -- not unless the government starts paying the wages of employees at uncompetitive firms to keep them from losing their jobs.
    - djrobstep 4y ago
      Did you even read what I just wrote? Package delivery still exists in countries with sectoral collective bargaining. No government payments are involved - all that's different is industrial bargaining laws. The companies are competitive - they just compete on actual efficiency rather than undercutting worker pay and conditions.
      - eru 4y ago
        What do you mean by 'actual efficiency'? Whatever companies in an economy with sectoral collective bargaining can do to cut costs and increase revenue is also available to companies in economies without sectoral bargaining.
        djrobstep 4y ago
        It might be "available" but the focus and outcome will be different. Suppose there are two delivery firms: - Firm A develops innovative delivery routing software that cuts delivery costs by 20%. -Firm B is rubbish at software, but really good at underpaying workers and getting away with it, such that they reduce costs by 30%. Without sectoral collective bargaining and stronger labour rights more generally, Firm B will win. But the better outcome for workers and efficiency is for A to win.
        twblalock 4y ago
        Firm B would be pretty easy to compete with, because it would end up with the worst human capital out of all of the firms, and a firm with better people would find a way to add value that Firm B could not. Amazon is definitely not Firm B, although I suspect that is what you were driving toward. Amazon has invested more in being competitive than any other company it competes with in almost every area, and despite the nonsense you read in the media, it offers above-average pay and benefits in the industries it is involved in. Despite that, all warehouse and delivery jobs suck and are dangerous, but that says a lot more about those jobs than it does about the company.
- nerdponx 4y ago
  > they can move jobs If they could, they would.
  - eru 4y ago
    https://fred.stlouisfed.org/series/UNRATE https://fred.stlouisfed.org/series/UNRATE
    - nerdponx 4y ago
      Humans are not ideal gas particles bouncing around in a frictionless canister. Aggregate unemployment rate says very little about the difficulty of finding stable work that pays enough to support a small family, or of the high switching costs involved generally with changing jobs.
      - eru 4y ago
        Sure. The aggregate data says that in aggregate 96.5% of people who want a job, have a job.

Spooky23 4y ago

Amazon isn’t disrupting UPS. They’ve sunk billions to try and smooth out the slowdown in an e-commerce business that is a boat anchor on the real money machine - AWS.

fatneckbeard 4y ago

Amazon does not make money shipping products. they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to eliminate competition by taking a loss on every single other part of their business. thats not really what is meant by a free market.

eru 4y ago
> they are trying to destroy competition by the service equivalent of illegal dumping, using their AWS profits to eliminate competition by taking a loss on every single other part of their business. That kind of subsidy of the average American would be very nice of Amazon. Alas, it's highly unlikely. See https://www.econlib.org/library/Columns/y2017/Hendersonpredatory.html https://www.econlib.org/library/Columns/y2017/Hendersonpreda...
- TheCoelacanth 4y ago
  You can't refute something that is actually happening based on economic principles. Your theory has to match the data, not the other way around. This is the equivalent of saying "that plane isn't flying because gravity holds things down".
- nerdponx 4y ago
  > But Firm A now has a tough problem. If it sells for anything more than $5, another competitor might enter. There is no reason to think that another competitor couldn’t match the $5 average cost. And there is some reason to think that its cost could be lower than $5. Why? The new competitor could buy Firm B’s assets at fire-sale prices, thus reducing average cost. Ah yes, the mythical world where the assets of an enormous but deteriorating corporation are just sitting around on a shelf for purchase by any plucky entrepreneur with enough vision, bootstraps, and good old American sack, who will of course be able to restart the whole enterprise immediately, and, having purchased the whole thing on the cheap, will have so greatly reduced average cost that they can immediately call the predator's bluff and restart the same price war, this time with the upper hand and victory in sight. Of course this argument makes no sense except in a world of spherical cows and perfectly rational actors. The more plausible argument against Amazon operating their logistics business at a loss is the obvious fact that they have invested enormous resources into squeezing efficiency out of their logistics business, to the point of being now-infamously abusive of their delivery drivers and warehouse staff. Keeping marginal cost as low as possible clearly matters a lot to Amazon management. What's more likely is that they have invested in keeping marginal cost down specifically in order to run their logistics business at a very small but positive margin and still compete on price in order to establish and maintain dominance and high volume. Don't forget that they are also skimming value off of several points in the e-commerce lifecycle, basically at every point except actually charging customers for shipping, but that's probably more than offset by all the Prime accounts that people renew every year but never get their money's worth out of. Then again, this is just speculation. I haven't actually looked at their financial statements, and maybe someone with more finance expertise can weigh in on whether there's anything more to be learned there.

mdasen 4y ago

I think their argument is that the market will sustain those jobs. UPS's earnings are up around 8.5% year over year and UPS has been doing consistently better than FedEx with the same revenue and employee headcount. There is danger with a strike, but it might be more limited than you've suggested. Yes, companies will try and keep shipping things with alternatives during a strike. Yes, some might want to stay with that alternative. However, there are two complications with that. First, I don't think people will decide to boycott UPS because they had a strike. I think shippers want to minimize their costs, not punish a shipper because they had a strike. Companies aren't going to pay FedEx more just because UPS had a once in a generation strike (and it looks like that last one was in 1997, 26 years ago). Second, do competitors have the capacity to pick up the slack? Yes, companies can expand over time, but they probably can't for the duration of a strike. Amazon started shipping its own packages years ago and is still UPS's largest customer. Amazon can't just scale up operations overnight and they're Amazon. I'm sure that FedEx, Amazon, and LaserShip/OnTrac will make a play for marketshare, but if they're able to get a reasonable contract, I don't think others will be able to move fast enough to really take marketshare in the short term. Now, if the contract puts UPS at a big disadvantage over the long-run, their marketshare will simply dwindle. However, as it stands, FedEx and UPS are making similar amounts of revenue (UPS is around 7% higher), but UPS is often making 2-3x the profit. Trailing 12 months: $10.2B vs 3.5B. 2021: $9.4B vs 5.6B. 2020: $5.1B vs 1.6B. 2019: $5.6B vs 0.8B. 2.9x more, 1.7x more, 3.2x more, 7x more. That's a nice run of much higher profits while having only marginally more revenue. It kinda looks like UPS has a good business model and that the union wages haven't been a hinderance to that model. UPS is valued at 3.2x more than FedEx despite having the same revenue and UPS's P/E ratio is actually a tiny bit lower - 14.24 vs 14.86. People are paying over 3x more for UPS stock because they're making great profits that justify being worth $157B to FedEx's $48B. Wall Street isn't the kind of place where they're going to love your stock because you're a union shop - probably the opposite. However, they do like the profits that UPS is bringing in compared to FedEx. Yep, my instinct was that UPS's fundamentals would be bad compared to newer and non-union shops. Turns out that they're making money way better than their main rival with better margins. It's surprising, but I'd say there's money for the union to go after. I'm not saying they can have unlimited demands, but if UPS is earning 2-3x what FedEx is on the same revenue, there's room for improvement in salaries. Even if the workers take only half the difference between UPS and FedEx and we look at the worst delta between the two since 2019 ($3.5B in 2020), we're talking $1.75B. Divide that by the 250,000 union workers and that's $7,000/year in more money. Even if we're talking about the 500,000 global workers, that's still $3,500/year. If UPS is looking at more expansion in the next few years (which seems likely), maybe the union can go for a bit more. Note: this isn't talking about bringing UPS down to zero profit. This is about bringing UPS down to 1.5-2x FedEx's profitability rather than 2-3x. With increases in package volume, maybe UPS could be back to 3x FedEx toward the end of the contract. UPS's business just looks strong. They have a similar employee headcount as FedEx and similar revenue, while having way better profits.