As we progress through 2011, a major problem in the industry will be maintaining normal labor relations between the International Longshoremen’s Association and management. Labor friction is more prevalent than we have experienced in several decades. These problems are being fueled partially by the pressures of the next election of the ILA president in July 2011.
The current master contract extension is for two years, through September 2012. The extension redid many of the terms of the 2004 contract, most notably the gradual removal of tiered rates and elimination of the tonnage cap on container royalty payments.
Past contract negotiations have been relatively calm, marked by rational dialogue resulting in contracts that have arguably made the ILA one of the highest, if not the highest-paid trade unions in the U.S.
Costs at many ports, most notably New York-New Jersey, have been accelerating at a precipitous rate, largely because of the gradual removal of the tiered rate structure and the removal of the cap on container royalty.
In the past, generous rate increases to labor were offset by commensurate increases in productivity. This trend clearly isn’t evident, particularly at the East Coast’s largest port.
Costs at New York-New Jersey have always been exacerbated by work practices that exist only there and go back to the early days of containerization. This situation was highlighted in Waterfront Commission hearings in November and December.
New York’s competitive position with its sister ports is under serious threat. Between 2003 and 2012, total ILA contract costs will have increased 26 percent, from $1.37 billion to $1.73 billion, while hourly labor costs will have increased by more than 43 percent.
By 2012, container royalty will be a $500 million program, double its cost in 2003.
For years in our industry, labor stoppages were rare or nonexistent. That climate has changed, at least in New York, causing government intervention over stoppages last September. This is an expensive way to negotiate for both sides.
Negotiations that should start this year for the master contract to begin in September 2012 will be difficult.