UPS driver pay deal US worth $170,000 year, firm says

UPS warns of lower profits due to pay increases for US workers, with average full-time driver salaries set to rise to $170,000 annually.

Shipping company UPS has announced that its profits for this year will be lower than expected. This is partly due to the pay increases it agreed to provide its US workers as part of a labor deal last month. Under the five-year contract, UPS stated that the average full-time driver will earn approximately $170,000 annually, including healthcare and other benefits. This is an increase from the current average of $145,000. These raises come as the US experiences its most significant inflation in 40 years, with overall prices rising by 3% over the past year.

The rising cost of living has put strain on household budgets, leading to labor tensions and unionization campaigns at companies like Starbucks. Strikes have also occurred across the country. The threat of a strike by the Teamsters union recently impacted UPS, as customers redirected approximately one million packages per day to rival companies, resulting in a loss of around $200 million in sales. UPS expects the labor deal with the Teamsters, which is anticipated to be approved by workers this month, to further impact its profits.

Due to the labor deal and a decrease in shipments amid a weakening economy, UPS now projects its adjusted operating margin for this year to be 11.8%, down from the previously expected 12.8% in May. UPS has the largest unionized workforce in the US and is known for offering relatively generous compensation. Drivers earning hourly wages of $40 or more frequently make national headlines.

The agreement reached with the Teamsters last month included raising the starting pay for part-time staff to $21 an hour and recognizing Martin Luther King Jr Day as a holiday for the first time. It also secured improvements in working conditions, such as the provision of air conditioning in new delivery vehicles. For drivers, the Teamsters union stated that the new contract will result in a pay increase of $2.50 an hour this year and $7.50 an hour over the five-year duration of the deal.

Labor leaders praised the agreement as a benchmark when it was announced. Workers at Amazon and other companies have since referenced the UPS contract in their own efforts to secure higher wages. Economists are closely monitoring these pay increases, as there are concerns that they could contribute to the existing inflation problem caused by supply chain disruptions during the pandemic and geopolitical tensions related to the war in Ukraine.

In June, wage growth in the US outpaced price growth for the first time in over two years. According to recent data from the US Labor Department, the average compensation cost in the US is approximately $43 per hour, with about two-thirds allocated to salaries and the remaining third to benefits.