Why dockworkers are concerned about automation

Dockworkers at ports along the East and Gulf Coasts are expected to strike at midnight which could cause a major disruption for the US supply chain. Mark Szakonyi, S&P Global Market Intelligence's container shipping and logistics expert and executive editor of the Journal of Commerce, joins Seana Smith and Madison Mills on Catalysts to break down the International Longshoremen's Association's (ILA) demands.

Szakonyi tells Yahoo Finance, "The International Longshoremen's Association has been very strong against any kind of automation on the East and Gulf Coasts. You have a degree of what they so-called call semi-automation at certain rail facilities, but they're definitely trying to hold the line."

He explains the fight for protections against automation is "something that we're seeing across any unions working in Western economies in which they're pushing back. To some degree, there are safety gains that can be gained through automation, but unions are also rightly concerned about [the] loss of jobs. Really, I think in this wage discussion, it's much, much more about salary."

Experts indicate that the length of the strike will determine the severity of the supply chain disruption. Szakonyi says, "We see both sides as being pretty dug in. We reported that US employers have tried to make overtures to the ILA about 10 times since June, [but] no luck there. [The] ILA has been very fierce with its rhetoric."

He expects "it's going to come down to most likely the Biden administration stepping in and while they have said that they have no plan to invoke Taft-Hartley, would break up, or at least put a freeze on the deal and continue to get cargo moving through the port, that calculation might change. The costs are going to ramp up," with Morgan Stanley estimating the cost could have a $45 billion impact per day.

"It will be really interesting as the Biden administration kind of looks at the calculation of wanting to make sure that they allow this contract agreement or allow the negotiations to go through, and not turn off the labor side of Democrats supporting [presidential candidate] Kamala Harris, but at the same time, showing economic stewardship because the longer this goes on, the larger the economic impact will be, and it's going to have other knock-on ripples."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Naomi Buchanan.

Video Transcript

It's interesting that the two sticking points of those workers going on strike obviously pay, but also automation and concerns about automation taking jobs.

I'm curious from your perspective, what can you tell us about the kind of irony here?

I guess that these workers are interested in a ban on automation.

But if there was automation, that could potentially be a better hedge against the impact of this current strike that we're seeing, does that mean that a ban on automation is kind of less likely to come out of these negotiations here?

Yeah, I mean, the, the International Longshoreman Associations has been very strong against any kind of automation in the east and Gulf Coast.

You have a degree of what they so called called semi automation at certain rail facilities.

Um But they're definitely trying to hold the line.

This is something that we're seeing across any unions working um in western economies in which they're pushing back, um you know, to some degree that there's safety gains um that can be gained through automation.

But uh unions are also rightly concerned about loss of jobs.

Um So, but really, and I think in this wage discussion it's, it's much, much more about salary and, you know, to your question about how long this could last.

We see both sides as being pretty dug in.

Uh, we've reported that us employers have tried to make overtures to the IL A about 10 times since June.

Uh, no luck there.

Um, IL A has been very fierce with its rhetoric.

So really, it's, it's going to come down to most likely the Biden administration stepping in and while they have said that they have no plan to invoke Taft Hartley, which is uh which would break up um or, or at least put a freeze on the deal and, and continue to get cargo moving through the port.

Um That calculation might change.

Um The the costs are going to ramp ramp up, you know, we saw uh Morgan Stanley yesterday put out an estimate saying an impact of $45 billion a day.

Um So it will be really interesting as the Biden administration kind of looks at the calculation of wanting to make sure that they allow this contract agreement or allow the negotiations to go through and not turn off the labor side of Democrats supporting possibly a presidential candidate Kamala Harris.

But at the same time showing economic stewardship because the longer this goes on, the larger the economic impact will be and it's going to have other knock on ripples