Many Americans heaved a sigh of relief earlier this month, after the International Longshoremen’s Association (ILA), a union predominantly representing East Coast and Gulf Coast dockworkers, suspended strike action. The ILA and the USMX – an organisation representing port operators amongst other stakeholders – have negotiated a temporary agreement extending until 15 January.
The suspension has significant upsides. Continued strike action would have been deeply damaging to living standards. Given the crucial role ports play in the American economic fabric, estimates suggest a single day of ILA strikes could have cost the US economy anywhere from $500 million to $4.5 billion. What’s more, it would have risked an upsurge in inflation at a moment when the economy seems on track for the fabled ‘soft landing’ – where the Federal Reserve steers price growth back to target without causing a recession.
However, the US isn’t out of the woods yet. The agreement between the ILA and USMX is temporary, and a significant sticking point remains unresolved: port automation.
Port operators generally want to augment automation, increasing their reliance on driverless trucks, cranes, and other machinery to transport goods from container ships onto American soil. However, the ILA stands opposed, demanding “absolute airtight language that there will be no automation or semi-automation.” This follows an agreement negotiated with the USMX in 2018, which banned the use of fully automated terminals or equipment and stipulated that no semi-automation should occur without the ILA’s explicit agreement.
However, the ILA argues that members of the USMX have violated these terms – introducing automation without the union’s approval at ports such as Alabama’s Port of Mobile.
The ILA’s anti-automation crusade begs the question: is this neo-Luddism exemplified, or does the union have a point?
As expected, the primary reason for the ILA’s opposition to automation is that it will reduce employment, with the union recently noting: “We want our jobs—the jobs we have historically done for over 132 years.”
Evidence on the impact of port automation on dockworkers’ employment is mixed. A 2022 study commissioned by terminal operators suggested port automation in Los Angeles and Long Beach increased employment, with paid hours at the two terminals rising 31.5%, “compared to 13.9% at the non-automated terminals”. However, another study commissioned the same year by the ILWU – a union representing West Coast dockworkers, found automation at those exact same ports reduced employment by 5%.
Port automation could be justified even if it caused job losses – but only if it makes ports more productive. US ports, which are notoriously unproductive, need to improve their performance given the intense competition they face globally. Not only would productivity gains benefit port operators, but everyday Americans too, considering the lower prices and higher economic growth they would generate. Surely, greater abundance for the many justifies worse employment prospects for the few – dockworkers that represent a tiny sliver of the workforce.
Unfortunately, port automation is hardly a slam dunk for productivity. A report by McKinsey found it actually made ports 7-15% less productive. Not only that, but it’s expensive too. Looking at the evidence, one could almost conclude that the only tangible benefit automation provides port operators is that it weakens the hand of unions – and the workers they represent. So, does this mean the ILA’s flat-out opposition to automation makes sense?
Not really. For one, McKinsey’s findings only apply if automation is poorly implemented. They find that with “careful planning and management”, automation could cause productivity to rise by 10-35%, with operating expenses (OpEx) falling 25-55%. Moreover, as Senior Infrastructure Fellow at the Institute for Progress, Brian Potter, notes – technological innovation will likely cause the gains from automation to rise as time goes by. Finally, dockworkers’ jobs are highly physically intensive and dangerous, with longshoremen being five times as likely to suffer a fatal injury as the average American worker. Surely, we should want their jobs to be automated away at some point.
Rather than dogmatically opposing automation, the ILA could learn from their Swedish counterparts. Sweden’s unions are generally much more amenable to automation, with their approach being best summed up by a former government minister: “We won't protect jobs. But we will protect workers”.
That being said, there are key differences between Sweden and the US. For one, Swedish workers that lose their jobs receive comparatively generous unemployment insurance – alongside other welfare benefits. Moreover, the country has robust active labour market policies (ALMP) in place to help Swedes retrain and find new work. These provisions mean that job losses resulting from new technology do not spark the angst and deprivation they do in the US – at least not to the same degree.
In that sense, the ILA’s stance speaks to the defects within America’s political economy – primarily, the fact that it makes unemployment an experience rife with misery. With Swedish-style policies in place, Americans might be more positive about automation – because they would mean that even if it culls jobs, those losing out have a measure of income security.
If nothing changes, however, anti-automation sentiment will continue to persist. And what that will ultimately mean is an America that is poorer and less productive.
The economist Joseph Schumpeter coined the term ‘creative destruction’ to describe an “essential fact about capitalism” – the displacement of old, outdated production practices with new, innovative methods – particularly new technology.
The gains from creative destruction that automation can generate are immense if well-implemented. But if America and Sweden can tell us anything, it is this: the only creative destruction that works is a creative destruction that puts workers first.
Image: Flickr/pete
Image cropped at bottom to occlude 'Wirralwater' watermark.
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