• UPS Warns Lower Profits Due to Employee Wage Increases
• Impact of Inflation on Labor Tensions and Unionization
• Teamsters Agreement and Increased Pay: Balancing Compensation and Profit Margins

UPS has warned that its profits will be lower than anticipated this year, due in part to the wage increases it agreed to grant US employees in a labor agreement last month.

UPS claimed that the average full-time driver will make $170,000 (£135,000) after the five-year contract, including healthcare and other benefits.

This is up from approximately $145,000 currently.

The increases follow the most severe spell of inflation in the United States in forty years.

In the year leading up to June, prices increased by 3% after increasing by more than 9% the previous year.

As rising costs of living strain household budgets, labor tensions have reached a boiling point, resulting in unionization campaigns at Starbucks and other companies and nationwide strikes.

The prospect of a strike by the Teamsters union has impacted UPS in recent weeks, as customers have diverted approximately one million packages per day to competitors, costing the company approximately $200 million in revenue.

In a call to investors on Tuesday, UPS stated that the agreement reached with the Teamsters, which is expected to be ratified by workers in a vote this month, would also hurt the company’s profits.

It now anticipates its adjusted operating margin to be 11.8% this year, compared to 12.2% in May. The decline is also the result of a decline in shipments as the economy diminishes.

UPS is the greatest unionised workforce in the US and offers substantial wages. Drivers discussing hourly wages of $40 or more are a common source of national news coverage.

Drivers earned $95,000 per year, or $42 per hour, plus $50,000 in benefits before the current arrangement.

The agreement reached with the Teamsters last month increased starting pay for part-time employees to $21 per hour, established Martin Luther King Jr. Day as a holiday for the first time in January, and improved working conditions, including promises to install air conditioning in new delivery vehicles.

The Teamsters union, which represents more than 300,000 UPS employees, stated that the new contract would increase driver pay by $2.50 per hour this year and $7.50 per hour over the five-year duration of the agreement.

When the agreement was disclosed, it was hailed by Labour leaders as a benchmark. Workers at Amazon and elsewhere have already referenced the agreement to advocate for pay increases.

Analysts believe that pay hikes could worsen pandemic-related supply difficulties and Ukraine war interruptions-related inflation.

In June, wage growth exceeded price growth for the first time in over two years.

In July, the US Department of Labour reported an average hourly pay of over $34. While the average compensation cost for US employers was about $43 per hour in the spring.

About two-thirds of the cost was allocated to remuneration, while the remaining third was allocated to benefits.