Over the last few months, the International Longshore and Warehouse Union and the Pacific Maritime Association have been negotiating a new contract that will cover nearly 20,000 dockworkers at 29 West Coast ports—including the massive port complex that sprawls across the southern shoreline of Los Angeles County.
The talks’ July deadline, however, has come and gone with little resolution. On top of this some truckers operating out of the Ports of Los Angeles and Long Beach have gone on strike against their firms, in a move that could expand to a more general strike by all truckers. NOTE: As of this writing, the striking truckers have voted to return to work following a request by Los Angeles Mayor Eric Garcetti for a 'cooling off' period.
These issues are inevitably leading to questions about the potential impact the turmoil might have on the Los Angeles economy—and the national economy in general. On the face of it, it may appear troubling. The Ports of Los Angeles and Long Beach not only represent the largest port complex in the United States by volume and value; they are actually one of the largest ports in the world. If things do blow up, could the fragile U.S. economy feel the pinch?
The short answer is no, it won’t. Although if things do heat up and the Ports are closed for business, expect much furor from pundits, the press, and firms that rely on the Ports for moving goods.
Labor unrest at Southern California’s major ports is not a new situation, and there is a history of breakdowns in negotiations that have closed the Ports for days, weeks, and if you look back far enough, months. The most recent incident was a brief strike in 2012 over job security issues. And then there was the bitter 2002 lockout of Port workers. I was at UCLA at the time, and when we were asked about what the impact to the economy might be, we looked into it.
There are a number of ways to analyze this issue. One is to only consider what the loss of billions of dollars in merchandise traffic might mean. But this ignores the fact that the economy is not so brittle. Indeed, business people are often faced with various inconveniences, and they work hard to mitigate losses due to these potential problems. I’d rather look at historical experiments—when strikes have occurred in the past—and then examine what happened after.
Some of the worst labor unrest at the Ports of Los Angeles and Long Beach occurred in the 1960’s and 1970’s—when the Ports were closed for months at a time. For the analysis at UCLA, we carefully studied what happened during and after the crises and found that whatever trade flows were interrupted during the strikes were quickly made up for once the Ports reopened. And as for other measures of economic disruptions—industrial production, prices for basic goods, employment, retail sales—nothing could be seen in the national aggregate data at all.
Some might argue that this isn’t a good example because the United States is more trade dependent now than it was then (trade was 7% of the economy in those years, over twice that today) and with just-in-time inventory systems that make the overall system more sensitive to disruptions in trade flows. But while there are more trade flows, a much higher share of those flows are consumer products, not industrial inputs.
And today, unlike the 1970s, although inventories are kept low, it is much easier and cheaper to make alternative arrangements to bring in critical items because of our new era of information technology and cheap communication. This includes air cargo, or wheeling products in though the East Coast or overland via Canada or Mexico. In a pinch, items can even be bought from alternative suppliers in those nations.
After the 2002 lockout we also examined the effects more locally. Despite all the noise over the disruption, little impact was actually felt in the Los Angeles economy on any level—from employment to local retail sales. This isn’t to say that no one would be harmed if the current turbulence were to expand. Some retailers could be affected by a loss of sales. But consumers are resilient, and if one shelf in the store is empty, they will turn to one that is full and buy something there. One business’s loss is another’s gain—in aggregate, things even out.
Farmers, who have fresh product to ship out, are likely to have the greatest concerns. But even here, there are alternative buyers and shipping arrangements. The price may be lower or the costs higher, but they will most often find a way.
The unfortunate truth is that the truckers do have some legitimate labor issues. These workers, particularly the independent truckers, truly get the short end of the employment stick when it comes to working with the Ports. And their pain is a loss for Los Angeles in the form of unsafe highways and dirtier air. But the kinds of efforts they are undertaking to improve their situation will not have the broader impact that some fear. Instead they will primarily impose a hassle cost on businesses.
And these kinds of headaches—as much as we like to avoid them—tend not to show up in any aggregate figures that indicate the health of the local or national economy.