COMMENTARY & ANALYSIS
America appears to have been spared a potentially ruinous freight railroad strike following intense last-minute negotiations supervised by the Secretary of Labor. Until the last week before the strike deadline, the general news media had left most Americans unaware of the looming rail strike and its potential devastating effect on an already shaky economy.
A strike of 100,000 rail workers threatened to impose a $2 billion hit per day hit to an already reeling U.S. economy—a loss estimate some observers believed was too conservative. The Biden administration had intervened months ago in the negotiations that were already two years old when it ordered a “cooling off” period, forcing the unions’ members to continue working while talks continued. However, the administration waited until just days before the strike deadline for Labor Secretary Marty Walsh to join the talks.
Although the strike never materialized, the looming threat of one sparked a series of actions that had their own negative impact on the nation’s economy. Amtrak cancelled long distance rail passenger service and mass transit agencies prepared for disruption by cutting back schedules. Freight rail service cutbacks had already begun on many lines as the railroads began restricting service in anticipation of the strike.
The White House also waited until only days until the strike deadline to ensure enough rail transportation service would exist during a strike for hazardous materials and essential products, such as the chemicals needed to produce clean drinking water, gasoline and diesel fuel.
In addition the White House staff scrambled to secure water and truck transportation alternatives to make up for the loss of most rail capacity. Unfortunately, they didn’t seem to be aware that their initiative would require 460,000 more trucks each day than currently exist, as American Trucking Associations informed them, along with reminding them that the industry is currently short 80,000 drivers.
Under federal law, Congress could have stepped in to halt the strike, but that could have been viewed as a betrayal of organized labor, which the Democrat congressional majority depends on for support. While some Republican legislators did work on such a bill, Democrats were able to put the kibosh on it before it could go anywhere.
For most of those who were reporting on the potential strike it came as a surprise that the biggest stumbling block to an agreement had nothing to do with pay, usually the heart of collective bargaining disputes. In this case, the two sides had earlier agreed on wage issues without a problem. So, what was the issue that almost sent the U.S. economy into a tailspin?
The sticking point was over the horrendous working conditions dictated by an extreme cost-cutting operations model called Precision Scheduled Railroading (PSR), which had been imposed on major railroads by Wall Street hedge fund managers to drive up their stock prices, eventually to the point when they could sell off their stock at a big profit.
In the process of embracing the PSR model, the major railroads fired more than 45,000 operating personnel, along with mothballing equipment, closing rail yards, cutting service and pulling back on investment into less profitable lines of business, like intermodal. When the COVID pandemic hit, they laid off even more employees and didn’t start trying to replace them until earlier this year when rail service cratered, contributing to the supply chain crisis.
These companies had failed to add needed personnel even though rail demand rebounded at the end of 2020, before the first year of the pandemic had ended.
Searching for an Answer
To make up for the missing workers and to deal with increasing demand for rail service, new attendance policies were imposed that kept operating crews on call almost all the time, under the threat of discipline and termination.
Earlier this year, members of Congress and the Surface Transportation Board (STB) heard testimony that these workers were burned out by the extra demands on their time that forced them to miss family events like their children’s birthdays and holidays. Many who were making six-figure salaries and with decades of experience simply walked away from their jobs because they couldn’t take it anymore.
This year, with the railroads even more shorthanded and service failures multiplying, the railroads mounted a big recruiting and training campaign (it takes six months to train an engineer), but it was too late to do any immediate good. Then we heard reports that the new recruits were walking away from their training sessions when they learned how terrible the working conditions are.
This was the real cause of the Sept. 15 strike threat. Of the 12 unions representing railroad workers, 10 had tentatively approved the proposed contract, but the two representing engineers and conductors—which had earlier approved the compensation package—refused to budge from their demand that the ruinous attendance and discipline policies be addressed.
What will happen next is anyone’s guess. The rank and file members of one of the other unions—the International Association of Machinists—has already rejected the tentative agreement reached by their union’s representatives, which now must be renegotiated.
As this was being written, full details of the conductors’ and engineers’ proposed new attendance policies had not been released. As a result, we don’t know if the members will vote to approve the new contract, and if they do, whether the changes will alleviate some of the misery PSR has created for rail workers.
What we do know is that the misery has yet to end for rail shippers, who continue to suffer from lack of available service, poor service when it is available, as well as from blatantly exploitative demurrage and accessorial fee practices the railroads have failed to justify to the STB.
But the railroads don’t seem to have any respect for the STB’s enforcement capabilities. The railroads’ arrogant failure to follow the board’s service directives, or to submit required data, angered board members, who have threatened to fine them for rail management’s disrespectful behavior.
Legislation has been introduced on Congress that would grant additional authority to the STB designed to allow it to rein in the railroads’ worst practices, but it is not known when—if ever—it will be passed (so far, only Democrat members support it). In the meantime, it seems assured that our nation’s already battered economy will continue to suffer worse at the hands of the railroads and their disastrous embrace of PSR.