I have been studying the so-called labor shortage problem, and business types have been studying this situation as part of their ongoing strategy of destroying working conditions and making more profits. During the investigation, I found an interesting juxtaposition between two American companies. It illustrates a lot of things we have known for many years, but it makes this kind of ruthless, neoliberal, and bottom-to-the-bottom competition behavior. Ambiguous. Well-paid workers with job security have better jobs and are happy workers. Companies that pursue a “competition to the bottom” strategy and try to build profits by destroying the conditions provided for workers will ultimately find it difficult to prosper because their bad reputation weakens their ability to attract production workers. In the case we are discussing today, the so-called “labor shortage” is actually just a sign of management’s willfulness. It is not a lack of workers, but a lack of workers who can tolerate the insults of low wages, onerous conditions and capricious management. This is also the type of discussion between union and non-union. The union workplace produces high productivity and worker attachment, while the non-union workplace finds it difficult to attract reliable employees and blames all this on “labor shortage.”
The story of labor shortage
I have always been skeptical of the labor shortage argument used by employer groups, usually to relax immigration standards and to maintain downward pressure on wages.
In the 1960s, developed countries generally had more vacancies than unemployed workers, which created a dynamic and efficient environment.
Not only are new entrants to the workforce able to effectively transition from school to work, but companies are also forced to provide job opportunities training to ensure that the workers they can attract have job-specific skills.
This means that wage growth is strong and companies have the incentive to invest in new capital to maintain a high level of productivity growth, which in turn means that higher real wage growth will not translate into rising unit costs and inflationary pressures.
This is a win-win situation, although it means that the company must share production results more fairly.
By the end of the 1960s, many employer lobby groups supported the monetarist wave of colleges because they saw it as a way to attack unions and began to undermine the full employment system (the vast majority of the population) that brought such benefits to workers.
In this period of neoliberalism, the term “labor shortage” is often just a mask to cover up what employers really want or don’t want.
They can provide higher wages, and considering the gap between labor productivity growth and real wage growth, the large-scale redistribution of national income from wages to profits will hardly be “affordable.”
They can also provide jobs for unemployed workers and provide them with training. Most of the debate about structural unemployment is actually only about employers showing prejudice against certain types of workers (age, race, color, gender, disability, etc.) rather than worker shortages.
In the 1960s, due to full employment, the ability of companies to engage in prejudicial behavior was reduced.
Last week (November 4, 2021), Bloomberg reported a story- Highly paid union employees let UPS unexpectedly win in the delivery battle – It pointed out that FedEx, UPS’s main competitor, is going through a difficult period.
It has encountered major difficulties in recruiting delivery drivers due to “the massive labor shortage that has swept the United States since the pandemic.”
FedEx is a non-union organization, and its salary level shows this status (much lower than its competitors).
The Bloomberg report stated that FedEx “increased additional costs of US$450 million due to labor shortages”.
Therefore, it sent a signal that “its profit rate will fall further.”
To complicate the problem:
The lack of workers also affects its reliability. The on-time rate of FedEx express and land parcels recently dropped to 85%…
We understand that FedEx’s bean counters have created a business model that relies on forked delivery arms—”One is used for the overnight air freight business handled by FedEx employees, and the other is used for its ground parcel service. This service uses Independent contractors make final-mile delivery by hiring their own non-union drivers.”
The reason for this structure is to reduce variable costs and truck maintenance costs, and to transfer costs to independent contractors.
“Gig economy” model to make more profits.
The pandemic has significantly shifted demand to door-to-door delivery and reduced commercial deliveries—in other words, it has pushed more work to FedEx employees and reduced the work of independent contractors.
One of the results of the pandemic is that workers seem to be reluctant to tolerate “low wages and challenging working conditions.”
Companies like FedEx and Amazon that rely on this desperate model of “competition to the bottom” and squeeze their employees are now “working hard to recruit” and are forced to pay higher wages.
FedEx calls it a “labor problem,” and anyone who knows the situation knows that this is a management problem-unchecked greed can backfire.
John Maynard Keynes (John Maynard Keynes) believes that although observing the downward rigid nominal wage level is an institutional reality, people cannot conclude that this is entirely the result of union resistance, which is usually a conservative interpretation.
He said that in times of economic downturn, employers refused to exploit employees by cutting wages. This actually had good economic reasons.
The reason is about “swing and roundabout”-what you gain on the one hand, and lose on the other.
He believes that if employers try to cut wages during an economic downturn, when workers are in desperate need of work, then as the cycle changes, these companies will find it difficult to recruit workers because their reputation will be poor—workers will think these companies are volatile , Avoid them.
Therefore, the strategy of cutting wages and conditions is short-sighted.
The delivery scenario in the United States seems to prove this.
Currently, UPS is a high-wage union company that pays generous pensions for its employees.
Compared with FedEx, it has a very stable workforce and strong profit growth.
In addition, its delivery performance is better than FedEx.
On September 23, 2021, logistics analysis—— ShipMatrix data provides insights into on-time delivery performance in July and August – Point out that UPS and FedEx “behave differently” and:
… the gap between FedEx and the other two is wider than normal (before the COVID-19 pandemic)
The logistics company ShipMatrix reported that the “on-time performance (OTP) indicators” for July and August were:
– July: FedEx, 90.2%; UPS, 96.2% and USPS, 97.2%; and
– August: FedEx, 86.4%; UPS, 95.3% and USPS, 97.15%
So FedEx is always late, and the situation is getting worse.
How can these companies have such different performance indicators?
Although the pandemic has put increasing pressure on delivery services due to changes in consumption patterns, the reality is that FedEx has been behind for a long time.
The Bloomberg article states:
The difference in performance predates the shortage of workers. Although the salary paid to union employees is almost twice that of FedEx Ground drivers, UPS’s return on invested capital is more than twice that of its competitors. Last year, UPS and FedEx had sales of approximately US$84 billion, respectively; UPS’s operating income was US$7.7 billion, and FedEx’s revenue was US$5.9 billion.
At the beginning of last year, I read a story where FedEx, another large mail transportation company, had a dispute with its employees over pay and working conditions.
The workers are seeking to form a union, and the company is spending a lot of money to prevent this from happening.
The Guardian reported (January 14, 2020)- FedEx invests heavily in preventing U.S. workers from joining unions – Noting that FedEx “bombed” their workers:
…With anti-union messages and forcing them to participate in anti-union meetings.
They tell employees that they should “thank the company for what they have provided”-low wages, unsecured jobs, strict supervision and management strategies, low retirement benefits, etc.
The company told employees that they must take care of their retirement life-“You can’t let FedEx Cargo take responsibility for your incompetence and failure to prepare for retirement.”
As the union boss “is out of money” and tries to become a parasite behind the workers and the company, FedEx has built a driving force for unionization.
And the cost of all this publicity? Between 2014 and 2018, FedEx “spent $837,000” on anti-union campaigns.
This article outlines the company’s history of anti-union activities as it has been trying to transfer as much of its costs to workers as possible (cutting pension rights, etc.) to make more profits.
The problem is that this strategy seems to be counterproductive.
The cultural differences between the two companies, especially in their attitudes towards union organizations, can be traced back a long time ago.
There have always been differences between them, and they lobbied lawmakers to change the law to accommodate their different views.
You have to go back a long way to see how this started.
UPS began operations as a truck company in 1907 and operated under the following conditions: National Labor Relations Act of 1935 – Aims to “encourage collective bargaining by protecting workers’ full freedom of association”.
State Administration of Taxation:
…Protecting workplace democracy by providing employees in the private sector with the basic right to seek better working conditions and appoint representatives without fear of retaliation.
Therefore, UPS has a long and proud history of providing its employees with a union workplace with good wages and conditions.
On the contrary, when FedEx was established in 1971, its focus on air freight meant that it began operating under the following conditions:
In the past, commentators boasted about the way FedEx can operate at a lower cost and “bragged to customers that it has not had a strike in 38 years” (source).
Proposed legislation in 2009- 2009-10 Federal Aviation Administration Reauthorization Act Dispute – Put these two companies under NLRA and make it easier for FedEx workers to join unions.
FedEx continued its lobbying and public relations campaign, claiming that this change was intended to “rescue” UPS, although the company was in good business conditions at the time and almost no government assistance was needed.
The Republicans effectively prevented the legislative transition, FedEx won the battle, but its workers lost
The result is that only a few FedEx employees have joined the union (mainly pilots), while UPS runs a union shop.
Given that UPS has hardly suffered a strike since its establishment, the myths about strike activities are easily exposed (source).
in conclusion
FedEx is currently struggling to cope with the so-called “labor shortage” and performance decline, while its competitor UPS is retaining its employees and achieving better performance results. This is a sign of the entire neoliberal era, which relies on a fictional world. They try to convince us that cutting wages, cutting job security, depriving association rights, imposing onerous key indicators (delivery time, etc.), and all of us, are the path to prosperity.
Throughout my career, I have been opposed to this myth.
It seems that finally there is more and more evidence that more and more people are realizing the lies.
Unions are good for workers (usually) unless they are corrupted by officials bribed by management.
Guaranteed work is good for workers, they have fixed nominal commitments (such as mortgages) and do not want the uncertainty of wage fluctuations.
But, in addition, as Keynes argued in the 1930s, these so-called “rigidities” (conservatives like to structure them as) are also conducive to maintaining profits.
Sure enough, the neoliberal era allowed capital to accumulate huge profits-but in this case, the system could not be maintained.
Eventually it will collapse.
That’s enough for today!
(c) Copyright 2021 William Mitchell. all rights reserved.
