United Parcel Service (UPS) has announced plans to cut around 12,000 jobs this year in an effort to reduce costs and navigate through a challenging business environment. The decision comes as the company faces a decline in package volumes and increased wages following a union contract signed last summer.
The job cuts are expected to primarily affect managerial positions and will result in an estimated $1 billion reduction in expenses for UPS, which currently employs nearly 500,000 people. According to UPS Chief Executive Carol Tomé, the layoffs reflect a “change in the way we work,” and the affected jobs may not be reinstated even if the business rebounds.
Following the labor agreement signed with the International Brotherhood of Teamsters, which represents over 300,000 UPS workers, the company experienced a loss in package volumes due to the uncertainty surrounding a potential strike. Although some of the lost volume has returned, UPS expects package volumes to continue falling in the first half of this year, with a potential increase in the second half.
The news has impacted the company’s stock, with UPS shares falling more than 7 percent. Additionally, UPS reported a 12 percent increase in wages for unionized workers in the fourth quarter, leading the company to reduce workers’ hours by about 10 percent to mitigate the impact on profits.
In the broader economic context, UPS’s job cuts come amidst a mixed outlook, with recent indicators suggesting resilient global growth but also signs of a slightly slowing economy. The labor market in the United States has also seen a slight uptick in the number of layoffs in December, with certain industries experiencing more pressure than others.
In response to the news, Julia Pollak, chief economist at ZipRecruiter, noted that certain industries may be feeling uncomfortable amidst the overall trend of job cuts and uncertain economic conditions.
Opinion: The UPS job cuts reflect the broader economic uncertainty and the challenges faced by industries as they navigate through shifting business dynamics. As the global economy continues to evolve, it is essential for businesses and policymakers to develop innovative strategies to support both workers and companies through these transitions.