UPS warns of lower profits amid labor deal wage increases

Global shipping leader UPS is facing potential profit challenges as it revises its annual forecast due to wage increases stemming from a new labor agreement with US workers. Over the course of the five-year contract, the average earnings of full-time drivers will increase to approximately $170,000, including comprehensive benefits, from the current $145,000. The backdrop of escalating inflation in the US has contributed to increased labor tensions and work stoppages in various sectors.

The looming possibility of a Teamsters union strike has led customers to redirect nearly a million packages a day to rival companies, resulting in an estimated $200 million in lost sales for UPS. The company’s revised projection for adjusted operating margin this year stands at 11.8%, down from the previous estimate of 12.8%. This change highlights the financial impact of the labor agreement and a drop in shipments attributed to an economic slowdown.

Noted for having the largest unionized workforce in the US, UPS is known for its solid compensation packages. The labor agreement includes not only wage increases, but also improvements to working conditions and benefits for part-time staff, such as air-conditioned delivery vehicles.

The Teamsters union, which represents more than 300,000 UPS workers, confirms the contract provisions, which include a wage increase of $2.50 an hour this year and a gradual increase of $7.50 an hour over the five years

Economists are closely watching these wage adjustments as concerns grow about their potential role in aggravating broader inflation problems, exacerbated by pandemic-related supply disruptions and geopolitical tensions such as the Ukraine conflict. Recent trends show that US wage growth outpaced price growth in June, a phenomenon not seen in more than two years.

In July, the average hourly wage in the U.S. was about $34, while employer compensation costs averaged about $43 an hour in the spring, according to the latest data from the Labor Department of the USA. Most of these costs corresponded to salaries, and the rest went to benefits.

This article is sourced from and written by AI.

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