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Detroit’s “big three” automakers are suffering the first strike to hit them simultaneously in their history. Targeted walkouts at General Motors, Ford and Stellantis plants by the United Auto Workers union are only the latest sign of action by an emboldened US labour movement that has secured some inflation-busting pay rises, but led to the largest number of days being lost to strikes this year since 2000. The activism poses political risks for President Joe Biden, who has pitched himself as the biggest ally unions have ever had in the White House. But it is a highly risky strategy for the labour unions, too.
The labour activism reflects a variety of factors. There is intense pressure on companies to meet employees’ surging living costs. Many workers feel high inflation, on top of the health risks they took while working early in the pandemic, means they have earned outsized raises. Labour leaders are pointing to the robust growth in corporate profits and executive pay over the same period. Workers from Detroit to Hollywood are also confronting the impact of new technology such as electric vehicles and AI.
Some wage demands and increases have been eye-catching. The Teamsters negotiated a deal with United Parcel Service under which the average driver should be earning $170,000 in annual pay and benefits within five years. Pilots’ unions agreed raises of up to 40 per cent from the three biggest US airlines. The UAW is seeking a 36 per cent pay increase over four years, plus other improvements; the automakers are offering around 20 per cent.
All this requires Biden to tread a very fine political line. The president’s pro-union convictions are underpinned by sound electoral calculus: labour leaders are important to Democrats in getting out the vote, especially for a candidate who struggles to excite the base. Yet the president’s electoral chances in 2024 also depend on his ability to maintain a strong economy and bring inflation under control. Hefty pay rises for auto workers, higher car prices for consumers and costly strike-related disruptions in Midwestern swing states would be a gift to Republicans.
The impact of strikes at the Detroit carmakers will be felt well beyond the companies themselves. Anderson Economic Group, a consultancy, warns of “cascading economic damages” including lost wages and earnings, curtailed hours, and possible shutdowns among smaller suppliers. Since unions now represent just 6 per cent of the private-sector US workforce, generous labour settlements have less of an impact on headline wage inflation. But some executives say cases such as the Teamsters’ UPS deal are raising pay expectations even in non-unionised companies.
Biden’s pro-union rhetoric has already been tempered by pragmatism, and his administration is now intervening in the UAW talks, much as it did when railroad and port workers threatened strikes that would have stalled US supply chains. The longer the strike continues, the harder his support for unions may be to sustain.
Unions, too, must be wary of overplaying their hand against a backdrop of technological shifts and the green transition. The Ford chief, Jim Farley, has said the auto industry will need 40 per cent fewer workers to build EVs, which have fewer parts. Extended UAW strikes could accelerate a shift of jobs from Detroit-based companies to their all-EV, non-union rival Tesla, as well as foreign-owned plants located mostly in the US south where wages are lower.
This raises questions over the goal of modern-day unionism: is it about preserving the number of jobs, or that there is merely better pay for the fewer industrial jobs likely to remain? Those are issues American labour leaders will have to weigh with care.