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Automation in a fragile economy: upheavals and opportunities

B.C.’s 2023 devastatingly expensive port strike has reignited the debate over automation’s encroachment into the workplace
DP World recently completed a $350 million upgrade of its Centerm container terminal in the Port of Vancouver

What happens when automation inflow collides with talent outflow?

An economically devastating port strike is one potential outcome. But opportunity in upheaval is another.

An obstacle in the 2023 contract negotiations between International Longshore & Warehouse Union Canada (ILWU) and the BC Maritime Employers Association (BCMEA) is at the crossroads of that collision.

For the ILWU, the spectre of container cargo terminal automation is looming ever larger on its members’ career horizons.

The federal government’s recent approval of the Vancouver Fraser Port Authority’s (VFPA) $3.5 billion Terminal 2 expansion project at Roberts Bank brought the issue into sharp focus for the union.

ILWU president Rob Ashton considers it the thin edge of a wedge that will accelerate automation incorporation into maritime container handling terminals up and down the West Coast.

That, he said, will kill good-paying jobs. A lot of them. 

A Prism Economics and Analysis report for the ILWU released in 2019 estimated that a semi-automated terminal operates with 50 per cent fewer workers and a fully automated terminal operates with 90 per cent fewer workers than traditional container terminals.

It forecast that full automation of marine terminal operations in B.C. would eliminate approximately 9,200 middle-class jobs and take more than $500 million annually from the provincial economy.

While the VFPA has readily agreed that Terminal 2’s design will include some automation, it has not said the terminal would be fully automated. 

Instead, it maintains the amount of automation incorporated in Terminal 2 would be up to the company that is eventually chosen to operate the container terminal.

Ashton is not buying that line. He has told BIV that Terminal 2 will be fully automated, which he said will be at the expense of 2,000 to 3,000 jobs.

“At the end of the day, how much automation is going to be there?” said Ashton. “Well, if I come in, and I have to pay back a $3.5 billion investment, what’s the easiest thing to get rid of? It’s workers.”

The VFPA’s numbers claim the project will generate tens of thousands of highly paid supply chain jobs, including 1,500 at the terminal and another 15,800 related off-terminal.

But that argument aside, automation is not going away on the B.C. waterfront or elsewhere in the overall labour market.

And more than technology is driving it.

Skilled labour shortages across the board are forcing companies to accelerate their search for options.

Consider, for example, the BCMEA’s claim during the port labour dispute that last year it faced significant skilled labour shortages that in Vancouver alone resulted in up to 25 per cent of jobs being left unfilled. 

It added that of the trades work the ILWU is exclusively entitled to supply in the city, 17 per cent on average went unfilled in 2022.

The union’s push in the 2023 contract negotiations to expand the ILWU’s exclusive rights to repairs and maintenance of not just cranes and other machinery used to move container cargo but to elevators, sprinkler systems and other equipment and technologies at terminals that are not directly connected with moving containers again raises the issue of skilled labour availability for both union and employers.

In the transpacific ports business, terminals cannot afford to drop the efficiency ball. The competition is too fierce. 

West Coast North American ports have been losing that competition over the past five years. 

Historic congestion at major container terminal hubs during the height of the pandemic economy accelerated the migration of containerized cargo to ports along North America’s east and Gulf coasts and more recently to Mexico, which has ready access to the continental market through the North American free trade agreement. 

The opening of the expanded Panama Canal in 2016 has also allowed larger container ships to bypass West Coast ports on the way to the large east coast and Midwest consumer markets.

ILWU boss Ashton is not blind to these factors. Nor is he or his union opposed to expansion of cargo handling capacity in the Port of Vancouver or other major Asia-Pacific Gateway hubs.

That expansion is good for union finances and its members’ job opportunities.

So, he is not against automation. It is part of the 21st century world of shipping.

But the ILWU is against automation incorporation that is not mutually agreed upon through consultation with the union.

Ashton has pointed to DP World’s $350 million Centerm upgrade in Burrard Inlet and Global Container Terminals’ $300 million rail densification project at GCT Deltaport as examples of mutually agreed upon automation incorporated with union involvement.

At a June 14 press conference called to oppose the Terminal 2 project, Ashton pointed to the Centerm project as an example of the right way to incorporate automation in local container terminals. 

He said in that case the union local “sat down with the terminal operator and came to an agreement on [automation] so the workers didn’t lose their jobs. That’s what moving into the future looks like. That’s what tomorrow looks like: governments and employers, labour groups, environmental groups and Indigenous groups and community groups sit down and figure this stuff out.”

But more than just maritime employers and unionized longshore workers have stakes in the 21st century automation equation.

Everyone from trucking companies to warehouses to consumers has money on the table when it comes to efficient freight movement.

Long Beach Container Terminal (LBCT) in California’s San Pedro Bay complex is a fully automated container terminal that can process approximately 3.4 million 20-foot-equivalent container units (TEUs) annually when it is fully operational. That is what the entire Port of Vancouver handles in a year.

In a previous interview with BIV, Weston LaBar, CEO of the Long Beach-based Harbor Trucking Association, lauded LBCT ‘s efficiency and usability for truck drivers.

He said he supported container terminal modernization projects because, if they are targeted strategically, they can improve the efficiency, consistency and predictability of trucker turn times and dual transactions in an appointment-driven ecosystem where time is money for truckers and shipping customers.

But not everything at a port terminal works better if it is automated. 

For example, robots are not necessarily more efficient than humans when it comes to operating machinery like the huge gantry cranes that move containers from ships to terminal docks.

McKinsey & Co.’s Future of Automated Ports agrees. 

It found that automation does not guarantee increased port productivity. But the report concluded that, if planned and executed well, it can cut port operating expenses by between 22 and 55 per cent and increase productivity by 10 to 35 per cent. 

That makes bottom-line sense for terminal operators and the future buoyancy of their businesses.

Automation and modernization can also improve working conditions for dockworkers and provide new opportunities to upgrade their skills in a rapidly changing employment landscape.

The VFPA maintains that Terminal 2 will generate $1 billion in wages and $300 million in tax revenue during construction, and $810 million in wages and $205 million in tax revenue throughout its operations.
Meanwhile, the BCMEA points out that it continues to make significant investments in training and upskilling its workforce, including $42.5 million budgeted for 2023. 

The maritime employers’ group has also committed to increasing apprenticeships in the industry by 15 per cent.

Asked to outline what the province is doing to ensure an equitable balance of automation efficiency with the need to find options for employers facing skilled labour shortages, Brenda Bailey, B.C.’s minister of jobs, economic development and innovation, said that over the next 10 years the province will have more than one million job openings, but she conceded that “there may not be enough qualified workers to fill those positions.”

Bailey pointed to the province’s StrongerBC: Future Ready Action Plan and its $480 million investment in post-secondary education and skills training as one initiative aimed at deepening B.C.’s human resources talent pool.  

It remains to be seen how much impact it will have in retooling and refocusing the province’s education and training system to meet the demands of a rapidly changing job market and balance the incorporation of automation with the career aspirations of a reskilled labour pool.

That uncertainty will continue to rattle the foundations of an already fragile economy in B.C.

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