Supply Chain Crisis? Inflation? What the Dockworkers Strike Could Mean
Questrom’s Jay Zagorsky says time is of the essence in settling the walkout
Dockworkers have walked off the job at 36 Eastern Seaboard and Gulf Coast ports, including this one at the Port of Newark, N.J., in a strike that could clog supply chains and create higher prices if it’s not resolved in a few weeks. Photo via Getty Images/Michael Nagle/Bloomberg
Supply Chain Crisis? Inflation? What the Dockworkers Strike Could Mean
Questrom’s Jay Zagorsky says time is of the essence in settling the walkout
Up to 45,000 dockworkers walked off the job Tuesday at 36 ports on the Eastern Seaboard and Gulf Coast, including Boston, in a strike that threatens to cost the economy $5 billion a day, choke supply chains just as holiday shopping begins, and reignite inflation.
It’s the first strike since 1977 by the International Longshoremen’s Association (ILA), which is demanding more pay and less automation of jobs for its members, who unload and prepare roughly half of the containers for global imports and exports that go in and out of the United States. The union had been negotiating a contract with the United States Maritime Alliance, which represents terminal operators and ocean carriers.
According to CBS News, “Union workers at ports in the East Coast and Gulf Coast earn a base wage of $39 an hour after six years on the job. That is significantly less than their unionized West Coast peers, who make $54.85 an hour—a rate that will increase to $60.85 in 2027, excluding overtime and benefits.”
Among the port operators shut down is South Boston’s Conley Terminal.
Businesses are flashing back to the supply chain crisis during the pandemic, when ships idled unloaded in ports as truckers and consumers shunned work and shopping. That triggered the inflation that bedeviled American consumers in 2021 and 2022. This year, a pileup of different problems—missile attacks on shipping vessels in and out of the Red Sea by Yemen’s Houthi rebels, drought-inspired limits on cargo shipping in the Panama Canal, and now the dockworkers strike—have throttled supply chains again.
BU Today asked Jay Zagorsky (GRS’87,’92), a clinical associate professor of markets, public policy, and law at the Questrom School of Business, to assess the potential economic punch from the strike.
Q&A
with Jay Zagorsky
BU Today: In terms of supply chain snarls and increased prices, will particular industries and certain consumer goods be more affected by the strike?
Zagorsky: With the port of Boston shut down by a strike, two types of goods will be impacted. First, heavy items that are cheaper to ship by boat than by truck or rail. For example, last year, about 36,000 cars, 400,000 tires, and 100,000 refrigerators, freezers, and dishwashers came through the port of Boston. The second [items] are lighter, lower-value goods that don’t have to be someplace immediately. For example, last year, about five million pairs of shoes, sandals, and other types of footwear came through the port.
BU Today: Will Boston’s local economy be hard-hit?
Zagorsky: The port of Boston is important to the local economy, but not crucial. The importance of the port has declined because over time companies have shifted to shipping high-value items by air instead of by sea.
Boston is lucky because we are the northernmost port impacted by the strike. Shippers trying to get to Boston can reroute items to the port of Montreal, which was in the middle of a 72-hour strike Monday, or the port of Saint John in Canada, and then truck items over the border. People who get things from the port of Baltimore or Savannah, Ga., don’t have options like Boston does.
BU Today: In forecasting the potential economic damage, how big a factor is the duration of the strike?
Zagorsky: If the strike lasts only a few days, there will be very little economic damage. Shippers have known about the potential for a strike for a long time, and many brought goods into the United States either earlier or in larger quantities in anticipation of a shutdown.
If the strike lasts a long time, the country will feel a lot of economic damage, since imports make up an important part of the US economy. To see how important imports are, when you are getting dressed, look at the labels on all your clothes. Where are they from? Almost all are imported. When walking down the aisles of the supermarket, look at where the products come from. Many are imported. We live today in a globally connected economy and interrupting those connections has real consequences.
BU Today: In what ways will average Americans feel the financial hits?
Zagorsky: I am not great at predicting the future, but if I had to make a guess, I believe we will start to see shortages well before we see prices rise. Consumers before the strike were starting to cut back on purchases, and businesses appear loath to lose more customers with higher prices. For example, I need new tires on my car. I was hoping to wait until after Thanksgiving to get a few more miles on them. But now I am thinking it might be a good time to replace them this week, in case the strike cuts off tire imports for a long time.
BU Today: Can the federal government get involved, and should it?
Zagorsky: This is a tough political question. The Biden-Harris administration wants union votes in November, so they want to back workers’ ability to strike. The administration also wants to tell the American consumer that inflation is coming down and pandemic shortages are not going to be repeated. These two positions are in direct conflict. Helping unions means letting the longshoremen strike. Helping consumers means shutting this strike down as fast as possible.
The economy is clearly slowing down right now. A long and bitter strike could push it over the edge. If I were president—and I am glad to be a BU professor, not POTUS—I would let the strike go on until Friday and then intervene over the weekend. That would let all sides feel they won something, but not push the economy over the cliff.
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