LOUISVILLE, Ky. (WDRB) — At United Parcel Service’s global air hub in Louisville, a newly hired part-time worker makes $20 to $21 per hour, depending on the worker’s shift.
But if UPS were going by the labor contract it struck with Teamsters union in 2018, the entry-level wage at Louisville’s Worldport hub would be far less: $15.50 per hour.
It’s not that Big Brown relishes paying more. In a tight job market, it takes more than $15.50 an hour to entice people to come unload boxes from trucks in a hot warehouse or to lug containers packed to the brim with packages on and off cargo airplanes.
Louisville is not alone. UPS is offering similar starting wages in Columbus, Ohio and Secaucus, New Jersey, for example. It’s advertising as much as $24 per hour for package handlers in Denver, Colorado.
And in no case is the company bringing people in at the Teamsters’ negotiated minimum of $15.50. As a federal contractor, the company is now required to pay at least $16.20 under an executive order from President Biden setting a minimum wage for companies doing business with the government.
UPS’ lowest-paid workers are at the center of a stalemate between the Teamsters and the company, with the union seeking significant increases and threatening a nationwide strike on Aug. 1 if it can’t agree to a new five-year labor contract with the company.
About half of the roughly 330,000 Teamsters employed by UPS are part-timers, typically package handlers who move boxes inside the company’s warehouses.
In contrast to UPS’ well paid and highly visible delivery drivers, the union calls part-timers the “unsung heroes” of UPS’ operation and says it’s time to end “part-time poverty.”
“You’ve got single mothers working two and three jobs there. The turnover ratio is out of this world. So they need to drive up the starting wage for part-timers (and) reward the long-term part timers,” Teamsters President Sean O’Brien told CBS News on Monday.
Most observers agree that UPS’ part-time workers are due a raise. The question is how much. Five years ago, many union members felt the Teamsters leadership capitulated by accepting a floor of $13 an hour instead of demanding $15. Now some say the target should be $25.
“These kids are working fast-paced; they are loading and unloading trucks. Some of the packages are 70 pounds. It is constant moving, physical work,” said Edgar Esquivel, a 25-year veteran driver in Orange County, California, who started as an $8.50-per-hour package handler in 1998. “Even three years ago, $20 might have been OK. They deserve $25.”
O’Brien hasn’t publicly set a dollar-per-hour target, and his office declined to specify. But he told industry publication Supply Chain Dive on July 6 that the union and the company are “probably $6 to $7 per hour apart” on part-time wages.
Teamsters Local 89 held a "practice picket" outside UPS Worldport on June 28, 2023. The union is holding demonstrations around the country as it threatens to walk out on Aug. 1 if an agreement is not reached on a new, five-year labor contract with UPS. The Teamsters represent about 340,000 rank-and-file UPS workers such as package handlers and package car drivers. (Photo by Chris Otts, WDRB News)
In taking a hard line on the issue, the Teamsters are in one sense making up for lost time. The union’s previous leadership collaborated with the company since the early 1980s to suppress the company’s entry-level wage on the assumption that it would allow the Teamsters to extract money from UPS elsewhere.
The union also faces a balancing act. As it seeks significant gains in the company’s entry-level pay, many union workers also want to restore a system in which they are progressively rewarded for staying with the company.
As inflation and the tight job market have forced UPS to hike wages well beyond the Teamsters’ negotiated rates, one side effect has been a flattening of the wage structure.
When everyone’s pay is raised at the same time, the result is that longtime workers earn the same as someone who was just hired, which many don’t feel is fair.
“I’ve been here for 7 years and get paid the same as a new hire,” said Dalton Embry, a “ramp” worker who helps load and unload airplanes at the Louisville air hub for $20 an hour.
Part-time work, full-time benefits
Viewed one way, the Teamsters-negotiated entry-level wage at UPS looks paltry compared to the norm in the U.S. transportation and warehousing sector.
In reality, part-timers typically earn much more than the contract minimum, UPS says. The company says its part-time workers earn “on average $20 an hour after their first 30 days.”
The Teamsters have called that misleading, saying about 100,000 part-timers earn less than $20 an hour.
Viewed more holistically, a part-time job at UPS remains a “very good job,” said Alan Amling, a former UPS executive who teaches supply chain management at the University of Tennessee-Knoxville.
That’s because much of the compensation comes not in cash, but in benefits: including the same no-premium health insurance coverage available to full-time UPS workers and a defined-benefit pension that is exceedingly rare in the private sector.
The Teamsters’ previous leadership acknowledged this. In attempting to sell the 2018 labor contract — which the union ultimately implemented over its members’ objection — the union produced figures showing that the majority of part-timers' compensation comes in benefits.
The union projected that by 2022, the average part-timer would earn $44.04 per hour, including benefits worth $24.70.
But in the figure workers care about most — cash wages — UPS faces increasing competition, Amling said.
“The challenge is that the disparity between UPS and the market now has dissipated. And so if UPS wants to keep attracting the best people, they are going to need to make some changes on wages,” Amling said.
Starting wages kept 'artificially low'
Amling started with UPS like many other corporate executives: as a side-gig to help pay for college. When he joined as an hourly employee in 1982, the entry-level wage was $8 an hour.
Adjusted for inflation, that’s the equivalent of $25 today.
So why has the entry-level wage for UPS workers fallen behind over four decades?
It was part of a strategy by a generation of previous Teamsters leaders.
In 2018, Dennis Taylor found himself in the unenviable position of selling the newly negotiated UPS deal to a largely skeptical base of union members. A longtime Teamster from Baltimore, Taylor helped negotiate the 2018-2023 contract for the previous Teamsters administration led by James P. Hoffa, the son of legendary Teamsters leader Jimmy Hoffa.
During a Sept. 7, 2018, call for Teamster members, Taylor acknowledged that the starting rate had been kept “artificially low” since the early 1980s.
Because new hires often don’t last in UPS’ physical work environment, Taylor argued that keeping the entry wage down actually benefits all workers, yielding savings for UPS that the union could redistribute to more senior members.
“You might ask, what did we get in exchange for keeping the rates so low over the many contracts? The answer is simple … UPS was able to save millions of dollars each year, and the Teamsters negotiators were able to extract millions of dollars more in wages and benefits during each successive contract,” Taylor said during the 2018 call. “This model has been in place for the last 36 years.”
When Taylor explained this in 2018, Teamsters leaders were trying to sell members a deal to raise the starting wage to $13 an hour, from $10.50. Many thought it should have been $15.
The union’s rank-and-file ended up rejecting the contract in nationwide vote, but the Hoffa-led Teamsters used a procedural move to push the deal through over the membership’s objections, saying the union couldn’t mount an effective strike.
O’Brien, elected in 2021 as a reformer promising to reinvigorate the Teamsters, is taking a “no concessions” approach. The union is now pushing for “across the board” raises for all of its members, regardless of status, Teamsters spokeswoman Kara Deniz said.
UPS hikes dividends for investors
At Louisville’s busy air hub, the Teamsters’ negotiated entry-level rate has been a nonfactor almost since the start of the 2018-2023 contract, as market conditions have dictated that the company offer a higher wage.
At first, UPS offered weekly retention bonuses that raised the effective pay well above the Teamsters’ contract minimum. Then, in mid-2021, the company hiked the starting hourly by $2, to $16.50, citing the strong job market.
Other cities or regions also have what UPS calls a “market rate adjustment,” in which the company voluntarily pays more than it is obligated to under the Teamsters contract.
But UPS can revoke those market increases whenever the company no longer deems them necessary and fall back on the negotiated rate.
Whether the previous Teamsters’ strategy of holding down entry-level wages to secure gains elsewhere worked, the company enjoyed soaring profits in 2021 and 2022 after a tough year in 2020. Last year’s net income of $11.5 billion was more than twice the company’s pre-pandemic haul.
Amling, the supply chain expert at Tennessee-Knoxville, estimated it would cost the company about $1 billion annually to increase part-time wages by $5-$6 per hour.
But following its surge in profits, UPS has also committed to returning more money to its shareholders. It hiked its dividends by nearly 60%, creating the expectation of an additional $2 billion a year going into investors’ pockets, Amling said.
UPS now faces the challenge of satisfying the Teamsters while maintaining the higher payouts to investors, as corporate executives are usually loathe to cut dividends, he said.
“The company did kind of paint themselves into a little bit of a corner there,” Amling said. “But there are a lot of smart people at that corporate office that I'm sure have plans for how they're going to cover expenses.”
A UPS spokeswoman declined to comment on the company’s capital allocation decisions.
$25 per hour or bust?
Meanwhile, not everyone agrees that $25 per hour is a realistic target for the union.
Teamsters for a Democratic Union, an independent group that supported O’Brien’s campaign, once circulated leaflets calling for the $25 minimum.
But the group no longer specifies a target wage in its current literature.
“We’re backing the international union and the fight for part-time pay of over $20 an hour and catch-up raises and more fulltime jobs,” said TDU staff director David Levin, who declined to comment on the previous leaflet.
Brianna Lambert, a part-time unloader at the Worldport hub, would like to see a new standard of $25. But having been on the job for three years, she also feels conflicted.
“I know some are being paid around my wage of $20 and yet they have been here for way longer than me,” she said. “It feels unfair for me to ask for more money when they’re being screwed.”