The short term economy is saved, but at what cost?
Over the past few months, rail workers in the United States have threatened to strike . A strike would cost the U.S. economy an estimated $2 billion a day, according to the Association of American Railroads. On December 1st, Congress ultimately averted the threat by forcing rail workers to accept a contract negotiated by the Biden Administration – a contract that union representatives had previously rejected. The new deal fails to change the conditions – namely that workers do not have any paid sick days and they are still subjected to on-call scheduling – that lead to the strike threat in the first place. The current regime is broken beyond repair. It’s time to nationalize the railroads.
Profits Over People
Freight rail plays a major role in the supply chain of U.S. goods and services. About one third of all freight in the United States travels by rail. As of 2019, freight rail had a profit margin of 51 %, making it the most profitable industry in the United States, higher than the profit margins of the real estate and tobacco industries. In 2021, the top seven freight rail companies had a combined net income of $27 billion.
The unbelievable profit of rail freight companies is driven by a system known as precision scheduled railroads (P.S.R). Created by E. Hunter Harrison in the 1990s the system sought to improve efficiency in the railroad industry – instead of going from terminal to terminal on multiple different trains, cargo would go directly from origin to destination – hopefully creating more consistent schedules for train crews. But P.S.R didn’t work.
Since the implementation of P.S.R. in the 1990’s, average freight train length has also grown with the goal to increase efficiency. From 2008 to 2017, the average length of freight trains rose by 25%. Some trains can be up to 3 miles long. The problem is that the rail companies only schedule two crew members to operate these long trains so small problems can lead to big delays. Additionally, over the past six years the major railroads have reduced their workforce by 30 percent. Increasing train length to reduce trips and reducing workforce have been done in the name of efficiency, but that efficiency is not seen in practice. The problem for shippers is that four companies control 83% of the freight market and, despite being two years post initial COVID disruptions, there is still widespread dissatisfaction among freight shippers with the service provided.
Unpredictable schedules are a nightmare for workers. Crew members remain on-call and are called in to replace their fellow crew members at odd hours of the night with less than two hours notice. If a worker happens to be sick, they are punished for calling out, because they are not given any paid sick days (unlike 80% of U.S. workers). Rail workers are also subjected to a points-based attendance policy that can be used to start disciplinary action against the employee. Under this system, workers only have 30 points for a 90-day period but could lose up to 8 points for a sick day and 10 points for refusing an assignment for any other reason. One five-day illness, for example, could trigger discipline.
For decades, rail freight companies in the U.S. have been putting their own profits over the people who work for them and the people and companies that they serve. And the government has allowed them to.
Government Failure
Since governmental and political leaders learned of a looming strike in the rail industry, there have been various interventions by officials in the federal government. In September, the Biden Administration announced that it helped negotiate a deal between the rail companies and the unions that would avoid a strike. The deal would give rail workers a 24% pay rise, annual bonuses of $1,000, one paid personal day, a freeze on healthcare costs and a promise to end penalties for time missed due to health emergencies.
Four of the twelve rail workers unions rejected the deal, in large part because it failed to give them the paid sick time they demanded. With a strike still looming at the beginning of December, President Biden called on Congress to intervene. Congress negotiated a deal to give rail workers seven days of paid sick leave, but the motion failed to reach the necessary 60 votes in the Senate.
President Biden and House Speaker Pelosi made clear that they were still in support of unions. Yet the President and Congress chose to force a contract that the workers did not want and that benefited the companies more than the laborers because, while the companies are giving a 24% pay rise to their employees, that is a small amount compared to their overall profits. Meanwhile, the employees still do not have paid sick leave and there has been no change in the way the companies operate their trains, which will force the workers to remain in the on-call system. But we should not be surprised: the government has long favored the rail companies over any other user of the rails. For instance, when Amtrak was established in 1979, Congress required that freight companies give preference to passenger trains, thus allowing for limited disruptions to passenger rail. However, only the Department of Justice can enforce that law and, in the last 40 years, they have only enforced it one time.
The government has failed to protect rail workers, passengers, and anyone who isn’t the top freight companies. Something has to change.
Ripe for Nationalization
Currently rail companies own the tracks on which they operate, a virtual monopoly. The private rail companies have shown that they care more about investor’s portfolios than the workers they employ and the customers they serve. The government, while recognizing the damage a rail strike would do to the economy, caved to the companies’ demands and did not materially change the circumstances that led to the almost strike. We can change that by nationalizing the country’s rail infrastructure.
American Association of Railroads
Public ownership of the rails would allow any company to operate on them, increasing competition between the companies and improving service for consumers. Furthermore, when any rail company can operate on any rail line, companies would also have to compete for workers because rail workers would no longer have to choose between moving across the country to a company they prefer or be limited to the companies that are near them. As a result, the companies will have to offer competitive pay and benefits to attract the talent they desire.
Nationalizing the rails is not unprecedented: President Wilson did so during World War One. That led to substantial public investment in building the rail system, from federal land grants to $1billion in infrastructure improvements. Nationalization would recognize the national importance of rail infrastructure, similar to the interstate highway system.
Whether the rail workers still choose to strike or not, it is clear that this threat will not go away without a serious overhaul of the rail industry.
You can reach the author of this piece, Jake Mericle, at: jm9776@nyu.edu
You can reach the editor of this piece, Patrick Spauster, at: ps4375@nyu.edu