UPS-Teamsters deal threatens to keep inflation elevated

foxbusiness.com:

International Brotherhood of Teamsters President Sean O’Brien discusses the tentative deal reached between UPS and Teamsters.

UPS and the Teamsters reached a deal on Tuesday to avert a potentially catastrophic strike, but the new five-year contract between the two sides also threatens to keep inflation abnormally high.

Under the tentative agreement, current full- and part-time UPS employees represented by the union will receive a $2.75-per-hour pay increase this year and $7.50 more per hour over the length of the contract. 

The deal is worth about $30 billion, according to Teamsters General President Sean O’Brien. 

The concern now is that the pay increase included in the deal risks creating a wage-price spiral, in which prices march higher and workers demand additional compensation in order to keep pace. That, in turn, can push prices even higher as companies look to offset the steeper labor cost. 

UPS AND TEAMSTERS UNION REACH AGREEMENT ON NEW CONTRACT TO AVOID POTENTIAL STRIKE

A United Parcel Service driver makes a delivery along the coast of Cape Cod in Orleans, Massachusetts, on Monday. (Robert Nickelsberg/Getty Images / Getty Images)

«I worry about what the resolution will mean for wage growth,» Nationwide chief economist Kathy Bostjancic told FOX Business. «I think that if wage growth remains fast and elevated, it prevents inflation from coming down as quickly as the Federal Reserve would hope.» 

Pay increases will also put more money into the UPS workers' pockets, allowing them to spend more and accommodate higher prices that companies are still putting into place.  

«The UPS and Teamsters agreement both reflects and adds to further upward wage pressure in the services side of the economy,» Bostjancic said.