Workers at United Parcel Service (UPS) have ratified a new five-year contract, avoiding a potential strike that could have disrupted Christmas deliveries and increased shipping costs. The International Brotherhood of Teamsters announced on Tuesday that an overwhelming 86.3% of voting members chose to ratify the agreement. The contract covers approximately 340,000 UPS workers in the US and includes several key provisions aimed at improving pay and working conditions.

One of the major changes in the contract is the elimination of a two-tier wage system for drivers. This system paid new hires less than veteran workers, which was a sticking point in the negotiations. The new agreement also raises pay, provides another paid holiday, ends forced overtime, and adds air conditioning to new models of UPS's brown trucks starting next year.

The deal includes substantial wage increases for part-time workers. They will receive a $2.75 per hour increase in 2023, and a total wage bump of 48% on average over the length of the contract. Full- and part-time workers will receive an additional $7.50 per hour over the course of the agreement. The contract is being hailed as one of the most lucrative ever negotiated by the Teamsters at UPS.

The agreement not only benefits UPS workers but also has wider implications for the labor movement. Ending seniority-based wage tiers that pay new hires less than experienced workers has been a central issue in labor talks across various industries. The United Auto Workers (UAW) is currently negotiating with the Detroit Three automakers on this issue. If the labor cost-saving scheme at UPS is terminated, it could encourage other unions and potentially impact nonunion companies like Amazon.

Teamsters General President Sean M. O'Brien sees the UPS deal as a recruiting tool, particularly for warehouse workers at Amazon. O'Brien believes that the new contract sets a new standard for pay, benefits, and working conditions in the package delivery industry, and he warns nonunion companies like Amazon to pay attention.

The ratified contract also includes various additional benefits for UPS workers. It creates more full-time jobs, secures air conditioning in new trucks, and designates Martin Luther King Jr. Day as a full holiday for the first time. While the majority of UPS workers approved the contract, not all are satisfied. Some workers argue that the wage gains should have been larger, particularly for part-time workers.

The ratification of the contract is a significant relief for UPS and the broader US economy. A strike lasting 10 days could have cost the economy over $7 billion, according to consulting firm Anderson Economic Group. UPS had already cut its full-year revenue and profitability targets earlier in the month due to higher-than-expected labor costs and business lost during the contract negotiations.

The new contract is seen as a victory for the Teamsters and a model for other workers across industries. It reflects the enhanced bargaining power of transportation workers' unions in the current tight labor market and the growing public support for unions. The UPS deal sets a precedent for fair pay, improved benefits, and better working conditions and highlights the union's determination to achieve similar gains at other companies, particularly Amazon.