The economics of the UPS delivery deal

That is the topic of my latest Bloomberg column, here is the lead fact:

By the end of the five-year deal that the United Parcel Service and its drivers just agreed to, full-time drivers will make about $170,000 a year, counting health-care coverage and other benefits.

Sam Bowman, telephone!  And some further analysis:

It is all too common to decry the excessive profits of big business and root for higher wages for workers. But in reality, big business is more likely to bring about higher wages.

That said, countervailing forces will limit the distribution of worker gains. For instance, UPS package volumes have been dropping for several quarters, in part because pandemic-induced demand has fallen considerably. So don’t expect UPS to be hiring a lot more drivers, which probably made it easier for it to be so generous.

Going forward, UPS might also be expected to lose some market share. Amazon shipping already has been gaining at UPS expense, and that trend is now more likely to continue. The relevant Amazon workers are not unionized and are paid lower wages. In any case, if self-driving delivery trucks were just around the corner — metaphorically of course — then UPS probably would not have agreed to this package.

UPS can also claw back some of the worker gains by how it rations the driver jobs. Before they can drive, workers first must accept lower-paid jobs sorting and loading packages, a quasi-apprenticeship that can last for several years. That too is economics at work. That upfront deal also might worsen over time. After it was announced, one online jobs board saw searches for UPS driver openings rise about 50%. Higher demand may allow UPS to be pickier about hiring, and to offer lesser terms to loaders and sorters.

I expect the talent drain from academic life to increase.