Port Whine: Don't Drink-in Your Sorrows

While work stoppages related to a looming dockworker strike along U.S. East and Gulf Coast ports cannot be ruled out, our sense is that doomsday scenarios pointing to major supply chain disruption are overstated for two reasons.

The first is that controlled chaos has been the norm in the global shipping business throughout this expansion, and smart purchasing managers have adjusted their approach by bringing on critical inputs months in advance. The second is that the Taft-Hartley Act allows the President to mandate workers to return to their posts for an 80-day period while negotiations continue. It is hard to imagine an outgoing President Biden not invoking this mandate to ensure stability in the weeks leading up to the U.S. Presidential election.

Tommy Used to Work on the Docks

The possibility of a dockworker strike has risen amid stalled negotiations between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX). The current master contract, which covers 25,000 workers across several East and Gulf Coast U.S. ports, is set to expire on September 30. If an agreement is not reached before then, the ILA reports that thousands of workers will strike starting October 1, impacting half of the ten busiest U.S. ports.

There are 14 major port districts along the East Coast and Gulf of Mexico, stretching from Portland, Maine down to Miami and around Florida to the Gulf Coast ports in New Orleans and Houston. Through the 12 months ending in July, these ports took in nearly 40% of all U.S. port-level merchandise imports on a value basis, and the types of goods processed are diverse (Figure 1). A prolonged worker stoppage could disrupt supply chains and have knock-on effects throughout the transportation sector, yet the doomsday reporting about shortages and major disruption overstates the scope of potential disruption, in our view.

Disruption and controlled chaos have been the norm in the global shipping business throughout the current expansion, and we see reasons to believe that businesses will be able to weather this storm. We wrote this summer that domestic firms were pulling forward orders due to shipping delays stemming from the attacks in the Red Sea, as well as tariff hikes on a selection of Chinese goods that went into effect in August. The ILA and USMX have been negotiating since late May, and signs of disagreement were creeping up in late June and July. Given the already robust demand for imports, these disruptions added urgency, though it is not clear whether they tilted the negotiations in labor's favor. On a year-to-date basis, real goods imports are up 6% through July, while real goods exports are up a more modest 1% (Figure 2). The strength in imports has occurred alongside steady inventory growth—total business inventories were up 2.5% year-over-year in July, the strongest annual pace since May 2023. In short, many purchasing managers were already looking ahead and placing orders in advance of the potential dockworker strike.

Taking a step back, labor unions have more bargaining power in the transportation & warehousing industry (which includes dockworkers) than the broader private sector. Consider last year: 17% of transportation & warehousing employees were represented by unions, second only to those in the utilities industry. In addition to dickering over automation, a key component of the ongoing negotiation between the ILA and USMX is the familiar topic of wages. Union workers in this sector take home $1,231 per week on average. That is more than the $966 weekly pay for non-union workers in the sector. But in recent years, non-union workers have seen median annual wage growth that is more than a full percentage point higher. That adds up over time; relative to pre-pandemic levels, non-union workers boast an impressive 21% cumulative median wage increase compared to just a 15% total increase for union workers (Figure 3).

In the event that negotiations fail before the contract deadline, the Biden Administration can call striking dockworkers back to work. Through the Taft-Hartley Act, the President can mandate workers to return to their posts and impose an 80-day period for negotiations to continue. The Biden Administration has said it is not considering invoking the powers of this act, because doing so would undermine labor's interest. Labor leaders have insisted that the invocation of the Taft-Hartley Act would be met with work slowdowns and foot-dragging. There is no doubt that direct intervention could be seen as politically toxic, though it is difficult to imagine an outgoing president not stepping in to avoid any potential for disruption in the weeks leading up to the election. Longshoremen may not like the president getting involved, but retailers and manufacturers keen to get needed inputs would. Underlining this point is the fact that the Biden Administration has been nudged by the National Retail Federation and numerous trade groups representing retailers, manufacturers, farmers, automakers and truckers to facilitate negotiations and step in to prevent disruptions.

While we suspect the worst-case scenario of massive supply chain disruption are overstated, a prolonged strike eventually could cause us to become more circumspect about the outlook. A well-stocked cabinet can get you through a storm, but it cannot sustain you forever. In the meantime, we suspect some of the hand wringing over imminent supply chain disruption is overstated.

The banal subject of how employers reward and retain employees has been a sore point for two companies that were very much in the news in recent weeks.

Malaysia Airlines, which operates in the high-cost airline industry, is saddled with the departure of skilled engineers to newly established maintenance, repair and overhaul (MRO) operators in Subang. The exodus of some 70 engineers is one of several reasons for the national carrier to cut down its network, hence impacting its profitability just when it was coming out of the doldrums.

Singapore Airlines Engineering Company (SIAEC), one of two newly established MRO companies in Subang, rebutted allegations that it was responsible for poaching the engineers from Malaysia Airlines. It stated that the recruitment was done through online platforms and job fairs, which means the engineers had switched jobs on their own accord.

The other company with issues related to its employees is the newly listed 99 Speed Mart Retail Holdings Bhd . The listing resulted in the paper wealth of the owner soaring to more than RM13 billion.

99SMart is 83% owned by Lee Thiam Wah, who together with other shareholders of the mini supermarket chain, had already gained RM2.7 billion in the form of dividends over the last three years and the sale of their shares during the listing exercise on Sept 9.

Lee’s ascent to the list of Malaysia’s billionaires was marred by postings on social media of workers in 99SMart receiving low wages while the owner and his family basked in their wealth. The postings claimed that basic salaries were as low as RM1,800 and working hours were long as the outlets were open for 12 hours.

The 99SMart owners responded to the social media postings by stating that the average manager earns RM2,387 per month and it offered benefits such as annual increments and medical care to its employees.

The minimum wages are RM1,500 per month, which means 99SMart meets the requirements of the labour law.

However, what’s evident is that the owner’s reward for listing his company contrasts sharply with his employees’ situation. The wealth gap between them has become very noticeable in light of 99SMart bursting into the elite league of companies with a market capitalisation of more than RM10 billion.

But the reality is that 99SMart is not the only employer that pays low wages in the highly competitive retail sector. Generally, cashiers and casual workers in retailers such as supermarkets, eateries and fast food chains earn little and have to spend long hours at work compared with workers in other sectors.

The hourly wages of part-time workers are even worse and moreover, they do not get any benefits.

For comparison, in developed countries, the minimum hourly wages are fixed by the government and companies have to provide medical benefits and annual leave to their part-time employees as well.

Putting aside Lee’s wealth and the stark contrast with his employees’ relatively low wages, one should understand that nobody is forced to work in 99SMart or any company that offers poor compensation to their workers.

Malaysia has a high degree of labour mobility, especially among local workers. Workers leaving for better salaries is a common occurrence and there are more options these days with the new economy.

For instance, many have gone into the business of the new economy to deliver food and parcels or provide e-hailing services where the take-home salary is about RM3,000 per month.

The degree of labour mobility is far less in the aviation sector. Nevertheless, engineers will leave if there are higher offers with better career prospects.

In the case of Malaysia Airlines, despite the airline adjusting salaries four times in the space of 18 months, they still lost some 70 engineers.

The co-founder of AirAsia Group, Tan Sri Tony Fernandes, joined the chorus of individuals pointing the finger at SIAEC for the woes of Malaysia Airlines and called on the Singapore MRO company to be transparent in its recruitment process. Fernandes also took the opportunity to reiterate his call to the Singapore authorities to allow the setting up of AirAsia Singapore.

Setting up AirAsia Singapore is a different matter altogether, compared with SIAEC setting up an MRO centre here. Fernandes has been trying to set up AirAsia Singapore to capture international traffic flying into Singapore since the early years of the inception of the low-cost carrier. However, he has not succeeded.

SIAEC’s presence here will help build up the talent pool for MRO engineering and the positioning of Subang Airport as the regional centre for such activities. More importantly, the government expects more than 8,000 high-value jobs to be created from MRO activities over the years.

The demand for aviation engineers has already created a buzz. It is only a matter of months before more young graduates strive to enter that particular field of aviation.

As for transparency in SIAEC’s recruitment process, on the face of it, there does not seem to be anything that is obscure.

It’s all a matter of demand and supply. If Malaysia Airlines or AirAsia for that matter value their skilled engineers so much, they should just look into other ways to retain them. For instance, younger engineers tend to appreciate “paid-for” courses that allow them to upgrade themselves.

What the airline industry is experiencing today has been the bane of many other industries in Malaysia. From oil and gas to IT, accounting and even journalism, employers have always wrestled with retaining good staff.

Petronas Nasional Bhd have for years been complaining about experienced employees being pinched by the oil majors from the Middle East. The semiconductor industry has been losing talent to Singapore and the exodus is ongoing.

But nobody complains that it has disrupted their operations. They just deal with the issues at hand. Malaysia Airlines is doing exactly that by training more engineers.

Workers need a reason to stay with their employers. They should either be adequately compensated or passionate about the job. The third reason is when they feel that they can learn much by remaining with the employer.

Blind loyalty is certainly not a reason to stay. In fact, employees who stay on for long without being adequately compensated are probably complacent, which is not good for the company.

In the case of 99Smart, disgruntled employees should just leave because the state of the industry does not allow for higher wages. As for Malaysia Airlines, they are tackling the issue by simply training more engineers, which is the only option for the airline.

Source: Theedgemarkets

Prime Minister Datuk Seri Anwar Ibrahim wants the welfare of vulnerable groups in this country to continue to be given attention, in line with the concept of Madani economy.

Taking the example of the education sector, he said there are children of the rich who enjoy government-funded educational facilities, compared to the poor.

"As far as I understand, the majority benefits the elite groups such as senior civil servants, political leaders, [and] leading entrepreneurs, who are sending their children to the best schools funded by the government, and this is unreasonable, [and] unfair.

"Should a child of the rich be sent to the Faculty of Engineering, (whether) Malay, Chinese or Iban, he should pay, so that we can meet the demand; otherwise this subsidy will continue. This revenue will then be used to help the poor more," he said.

He said this when he opened the National Symposium: Eradicating Poverty in Putrajaya on Monday, which was also attended by Economy Minister Rafizi Ramli.

Therefore, Anwar, who is also finance minister, said all forms of leakages, including education subsidies to children of the rich, should stop.

While giving an indication on continuous government protection of vulnerable groups in Budget 2025, Anwar said subsidies to the rich that are being stopped will be diverted to help the poor.

He said that the government does not want the people to be left behind in the progress of the country, just because they are not given the right opportunities.

"If this country means independence and freedom, as well as justice, then the focus should be there (education), where schools should see continuous efforts to improve facilities, capabilities and quality.

"How should we do it? By ensuring funds are distributed. How can the funds be distributed? The form of leakage, including the [sending of] children of the wealthiest groups to science secondary schools that are aided and heavily subsidised by the government, should be stopped," he said.

The prime minister said that he is aware that some actions taken by his government are not popular with some people, but these need to be done for the welfare of the needy.

Source: The edge markets

The most popular proposal was a federal ban on the price-gouging of food and groceries – a Democratic proposal that some leading economists have criticized. Nearly half (44%) of all those polled agreed that it would strengthen the economy.

Though Harris has received criticism for being “light on policy”, a majority of all voters in the poll suggested they understand her policies just fine. More than 60% of voters said they understood Harris’s policies on the economy.

When asked how they feel about the US economy now, compared with the start of the summer, 35% of respondents said they were more pessimistic, while 29% felt more optimistic (29%). Nearly three-quarters (73%) of all polled said they did not feel any positive effects of good economic news today.

Source: Theguardian