UPS Agreement Exaggerates Fears of Inflation (255)

KNOXVILLE, Tenn.– The wage hikes in the Teamsters union’s tentative agreement with United Parcel Service are not inflationary, a University of Tennessee economist said Tuesday.

 Dr. Matt Murray of the UT-Knoxville Center for Business and Economic Research said that while UPS is a large employer, it is not so large that its wage increases will cause prices to rise throughout the economy.

 The pay increases could contribute to inflation if they are not accompanied by gains in productivity, Murray said.

 “The key to whether wages do affect price levels hinges on whether productivity can be sustained and perhaps improved upon,” Murray said. “If there can be some productivity gains within UPS, there would be no need for UPS to raise the prices.”

 Inflation occurs when wages increase and productivity stays the same or declines, Murray said.

To stay competitive UPS will seek to increase productivity before resorting to price increases, Murray said.

“They might outsource some of their functions, such as internal work like bookkeeping or accounting or they might try to automate some of the processes that are now undertaken by workers,” Murray said.

 Other package delivery companies can anticipate their workers will pattern their own negotiations on the UPS agreement, Murray said.

 “There is clearly a possibility that we are going to see some ripple effects as workers for other companies seek to home in on the UPS agreement,” Murray said.

Murray said the 15-day strike has not lasted long enough to have a serious impact on the national economy.

 “The real problem comes when a strike is so prolonged that there is no way to make up for foregone production,” Murray said. “That’s when the consequences are long and lasting for the overall economy.”

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 Contact: Dr. Matt Murray (423-974-1698)