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UPS Warns of Diminished Profits Due to Labour Agreement

Labour Agreement

BNR – Shipping powerhouse UPS has issued a cautionary statement, anticipating diminished profits for the current year. This is partly due to the pay escalations it recently approved for its US workforce in a labour agreement.

It revealed that the new five-year contract guarantees that a driver’s annual earnings are set to rise to approximately $170,000. The earnings are up from the current $145,000 level.

These upward adjustments come against the backdrop of the inflation witnessed in the United States over the past four decades. Inflation has seen prices surge by 3 per cent in the year leading up to June. This was preceded by a staggering 9 per cent leap in the previous year.

As rising living expenses strain household budgets, labour tensions have reached a boiling point.

The Teamsters union recently threatened a strike that prompted customers to divert approximately one million daily packages to competing firms. This resulted in a sales hit of around $200 million for UPS.

During an investor update call on Tuesday, UPS highlighted the impact of the Teamsters’ deal. This deal, while advancing workers’ interests, will exert pressure on the company’s profits.

The revised projection for the adjusted operating margin this year is now 11.8 per cent. It is a decline from the earlier estimate of 12.8 per cent in May. Also, this decline is also reflective of a dip in shipments amid a weakened economy.

Labour Agreement and Inflation Concerns Amidst Rising Wages

UPS holds the distinction of having the largest unionised workforce among US companies known for its relatively robust compensation structure. The company’s drivers, earning an hourly wage of $40 or more, have been the subject of widespread media attention.

The recently ratified Teamsters contract bolsters starting pay for part-time employees to $21 an hour. Moreover, it recognises Martin Luther King Jr Day as a holiday for the first time ever. It also secures enhanced working conditions, including a commitment to providing air conditioning in new delivery vehicles.

For drivers, the Teamsters deal will result in a $2.50 per hour pay raise this year, followed by an increase of $7.50 per hour over the contract’s five-year duration.

Economy experts are closely monitoring these wage hikes, concerned that they could contribute to an ongoing inflation issue.

This labour agreement and its subsequent wage adjustments come at a time when US wage growth has surpassed price growth for the first time in over two years. The average hourly wage in the US was $34 in July, while employer compensation costs averaged around $43 per hour.


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