Op-Ed: Who Speaks for America’s Maritime Workforce?

In the recent segment on the American maritime industry on 60 Minutes, some of the most important questions facing the sector went unexplored, and it is worth taking a moment to fill in some of the gaps in the “who, what, when, where, why and how” of the story.

First, why? As in, why has the American maritime and shipbuilding industry reached the point that it has? The answer is fairly simple, and comes down to three things: low-cost labor, strict U.S. regulations, and massive subsidies that foreign governments provide their shipyards. The last two are easy to understand, so let’s focus on the first one, labor costs.

Foreign vessels depend on cheap foreign labor, and that is what makes its low prices possible. According to the Philippines’ Department of Labor and Employment, a quarter of the international mariner workforce is from the Philippines. The reason is that the Philippines has heavily invested in maritime schools that produce a significantly less expensive workforce, despite routinely failing to meet international standards.

How cheap? Let’s look at who is doing the work. Typical entry-level mariners from the Philippines are paid $30 to $50 per day. That means these mariners are making $2.50 to $3.75 an hour, or less than half the U.S. minimum wage. Officers fare somewhat better, making $80 to $100 per day. In comparison, entry-level wages for a U.S. mariner are $200 to $450 per day, and captains and chief engineers can make up to $1,000 per day.

This is an important distinction because labor costs are up to 60 percent of the cost of operating a vessel. Thus, there is simply no way that a vessel crewed with U.S. mariners can compete with a vessel crewed with significantly lower-paid foreign mariners.

Shipyard workers are no different, and therefore where the ship is constructed matters. The average worker in a U.S. shipyard makes $42,000 to $49,000 per year, with specialists making more than that. In the largest shipbuilding nation in the world, China, the average worker makes $10,200 to $20,400 per year. South Korea, which was featured heavily in the 60 Minutes piece, supports salaries closer to U.S. workers. However, that is only for the South Korean nationals in these yards. South Korean shipyards also employ tens of thousands of foreign contract workers who make 60 percent less than the Korean nationals. When this portion of the workforce is factored in, the overall labor cost structure is far lower than in the United States. In fact, a recent study estimated that 86 percent of new hires in South Korean shipyards were foreign contract labor.

Similar to mariner wages, U.S. shipyards cannot compete with these cost advantages. Labor cost is the second largest input cost in vessel construction, consuming 15 to 30 percent of the cost of a vessel.

Rightfully, American laws prevent these exploitative hiring practices and should discourage them globally as well. Shipyards in the U.S. are not allowed to supplement their workforce with foreign contract workers who make half of what U.S. workers make. And, when U.S. vessels are engaged in transportation within the United States, they are required to employ U.S. mariners. This is thanks to the Jones Act. For American workers that count on these jobs, the question of when it matters is simple: it matters every single day.

What often gets lost in this debate is what critics of the Jones Act really imply: not simply that costs are higher, but that American labor and the standards that come with it are the problem. At its core, this view suggests that U.S. shipyard workers are paid “too much,” and that their wages should be driven down because foreign crews can be hired for a fraction of the cost.

That’s not a solution, and it is not how we will solve for the rising cost of oil. Instead, the “solution” to waive the Jones Act will create a race to the bottom. It will not benefit American workers, and has not yet proven to lower costs for American consumers.

Those of us in the offshore energy market are acutely aware of this fact. We have seen the Jones Act regularly skirted by foreign vessels and loopholes created that allow these cheaply constructed and staffed vessels to operate in U.S. waters for extended periods. Despite claims otherwise, there has not been a corresponding decrease in the cost U.S. consumers pay for domestically produced offshore energy.

So the question remains: if we shift more of this work to foreign labor and foreign-built vessels, where is the evidence that American consumers will benefit? More specifically, if we cede the construction and operation of vessels that transport oil or LNG between U.S. ports to foreign workers and mariners, why do we expect the price at the pump to be any lower?

Instead of defaulting to a race to the bottom on wages, there is an opportunity to more fully examine solutions that support American workers and strengthen the U.S. maritime industry, ensuring a level playing field where all vessels operating in U.S. waters follow the same standards. The Jones Act sustains American jobs, strengthens national capability, and supports an industry that is critical to our economy and security.

We should continue asking hard questions, but they need to be the right ones. We should be asking why the American maritime and shipbuilding industry is where it is today, and what policies will strengthen it moving forward. The focus should be on sustaining American jobs and ensuring a resilient, competitive U.S. maritime industry for the future.

Aaron Smith is president of the Offshore Marine Service Association.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.