Union fights grow US workers’ slice of profit pie

WASHINGTON, Aug 18 (Reuters Breakingviews) – After losing popularity for more than four decades, unions are back with a vengeance. Strong demand for workers has given organized workers a stronger hand at the bargaining table. Yet employees are still taking home a smaller slice of companies’ income than before the pandemic. Growing labor action will force firms to fork over more of the economic pie.

The pandemic-era economy remains a healthy one for workers. Average pay has climbed 4.6% in the 12 months to June, according to the U.S. Employment Cost Index, beating the 2% to 3% gains seen through most of the last two decades. Annual increases to wages are also beating inflation for the first time in more than two years.

Yet by one measure, employees aren’t doing as well as they did before the pandemic. Workers’ share of corporate earnings reached 75% in the first quarter, compared to 76% in the last three months of 2019, according to the Economic Policy Institute. Closing that one-point difference today requires $120 billion in higher wages.

Persistent labor demand has given unions leverage to close that gap, and they are starting to use it. The threat of a 340,000-person strike helped employees at United Parcel Service (UPS.N) win a spate of pay hikes last month. And labor action is causing headaches elsewhere. The United Steel Workers union has asserted itself aggressively in a bidding battle for U.S. Steel (X.N). UPS cut its full-year profit forecasts last week, citing higher compensation costs. Yellow CEO Darren Hawkins blamed the Teamsters for the company’s recent bankruptcy, saying on Aug. 6 that workers’ demands drove the company out of business.

There is more to go around. Corporate profit is 30% above its pre-crisis high, at $2.7 trillion, according to the U.S. Bureau of Economic Analysis. The S&P 500 Index’s (.SPX) net profit margin rose to 11.5% in the first quarter, nearly a full percentage point higher than in the fourth quarter of 2019, according to FactSet data. With organized workers showing clout, they’ll be able to pull some more profit their way.

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CONTEXT NEWS

U.S. Steel said on Aug. 17 that its labor agreement with the United Steel Workers union doesn’t allow organized employees the right to block a sale of the company that’s linked to its strategic review. The union said on Aug. 16 that it would only support the offer from Cleveland-Cliffs, adding the company “has shown itself to be an outstanding employer.”

United Parcel Service lowered its forecasts for full-year revenue and profit on Aug. 8. Customers moved more business than expected to competitors as UPS negotiated a labor deal with its 340,000 unionized employees in July, Chief Executive Carole Tome told analysts in a call. UPS lowered its forecast for adjusted operating margin in 2023 to 11.8% from a prior estimate of 12.8%.

Trucking company Yellow filed for Chapter 11 bankruptcy protection on Aug. 7 after halting operations the week prior. Chief Executive Darren Hawkins blamed the International Brotherhood of Teamsters union, which represents about 22,000 Yellow employees, for the bankruptcy, saying the union “was able to halt our business plan.” Yellow averted a strike with its organized workers on July 23 by agreeing to pay more than $50 million it owed in employee benefits and pension accruals. The company had appealed to the union for help cutting costs, only to be rebuffed by its president.

The U.S. labor share of corporate income rose to 75% in the first quarter, according to the Economic Policy Institute’s analysis of U.S. government data. That’s down from a pre-pandemic peak of 76%.

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