Union Reality Bites

The Wall Street Journal comments Reality Bites UPS and the Teamsters

Two years ago Teamsters boss Sean O'Brien touted a "historic" labor agreement with United Parcel Service. Now comes the rest of the story, and it isn't pretty. UPS shares plunged Thursday 14.1% after it announced workforce and delivery reductions. Workers who lose their jobs can thank Mr. O'Brien.

Recent earnings reports have been mostly upbeat with many companies announcing new investments. Not UPS. The carrier on Thursday announced a "network reconfiguration" that "could result in the closure of up to 10% of our buildings, a reduction in the size of our vehicle and aircraft fleets, and a decrease in the size of our workforce."

It will also cut half of its delivery business with Amazon, its largest customer. UPS's rising labor costs have made many Amazon deliveries less lucrative and perhaps unprofitable. Amazon will now use its own network to deliver more of its own packages, which it can do at lower cost than UPS because most of its drivers aren't unionized.

The Teamsters have found little success trying to organize Amazon workers, so it's ironic that their labor contract with UPS is making the retail giant bigger. The 2023 UPS agreement increased average compensation for full-time drivers over five years to $170,000 from $145,000. Teamsters at UPS get up to seven weeks of vacation and don't pay healthcare premiums.

"Teamsters have set a new standard and raised the bar for pay, benefits, and working conditions in the package delivery industry," Mr. O'Brien declared. "This is the template for how workers should be paid and protected nationwide, and nonunion companies like Amazon better pay attention." No doubt they are.

UPS's travails are a warning to other companies and workers. Last January UPS said it would cut 12,000 jobs, mostly in management, owing to falling package volumes and rising labor costs from its Teamsters agreement. A couple months later UPS said it would close some 200 sorting centers, which spurred thousands of layoffs.

Last month UPS said it plans to dismiss 404 workers in Commerce City, Colo., to automate a processing facility and 304 in Oklahoma City as part of another facility "modernizing." Congratulations to Mr. O'Brien for pricing his members out of jobs. When labor costs rise above what the market will bear, it becomes more efficient to employ robots—who won't go on strike.