The Great Railroad Strike of 2022 Averted (So Far) After Biden Intervenes

By Lambert Strether of Corrente.

Trains are big:

(By Doug Wertman from Rogers, AR, USA – Cajon Intermodal, CC BY 2.0, https://commons.wikimedia.org/w/index.php?curid=11342686)

Not only that, the railroad industry is both big and extremely complex; railroads were the first big business. So there’s a lot of history here, including the Great Railroad Strike of 1877 and the Pullman Strike of 1894, some of it tortured.

Now as then, railroads were essential to the supply chain. Recently, however, railroads — and especially railroad workers — aren’t doing so well. From the always fun and interesting Freight Waves:

America’s railways are in an unusually chaotic state as Class I lines struggle to find employees. That’s led to congestion that analysts say is even worse than 2021, which saw some of the biggest rail traffic in history.

Outside being stuck behind a miles-long behemoth, one does not think often about the importance of the humble train. It isn’t as ubiquitous as the truck, as swift as the cargo plane or as cosmopolitan as the container ship. It may seem even a bit antiquated. Indeed, the cargoes on railcars aren’t usually goods exposed to the consumer — think gravel, grain, coal and chemicals. These are crucial components for our larger economy. Gravel becomes the foundations of our homes and roadways, grain our food (and our food’s food), coal our electricity and chemicals the basis of many everyday products.

So, while you may not have been keeping up to date with rail congestion, industrial bigwigs and lawmakers alike are furious. The coal industry is slamming rail for the “meltdown” in service capacity and grain shippers said they had to spend $100 million more in shipping costs to get their product moved amid poor rail service. The Port of Los Angeles is taking to the press to demand rail move those gosh darn containers away, saying that railroaders could cause a “nationwide logjam” with the unmoved containers sitting around.

As readers probably know, railroad union members voted 99.5% to authorize nationwide strike. That doesn’t mean that there will actually be a strike, as we shall see. However, railroad labor relations will assume increasing salience over the summer and into the midterms (especially for Joe Biden, who vowed to become America’s “most pro-union” President), so it will be useful to have some familiarity with all the moving parts. In this post, I will glance at labor law, railroad unions, the railroad business model — “Precision Scheduled Railroading” — and the railroad workplace.

I approach this topic with some diffidence, because of its complexity, so I hope that readers will correct or expand on what i wrote. (Alert reader Upstater, an actual railroader — the NC commentariat is the best commentariat — has already commented on Precision Scheduled Railroading here, here, here, here, and here.)

Railroad Labor Law Is Complex

By beginning with the strike vote, we began in medias res. Railroad workers are governed by “a slew of complex labor laws” and a strike threat doesn’t necessarily mean a strike. Freight Waves:

Rail unions have been negotiating with their employers since January 2020, with a “dead end” in negotiations reported two years later. Now, President Joe Biden is being charged with appointing a “Presidential Emergency Board” to nail down a new contract. If he doesn’t do so by Monday, railroad crews could legally have their first nationwide strike since 1992.

(You would think the threat of a “disastrous” strike would give workers a lot of power. Read on.) Here are the next steps in the convoluted process, from Railway Age:

President Biden on July 15 established a Presidential Emergency Board (PEB) [by Executive Order] to investigate a wage, benefits and work rules dispute between most major railroads (and many smaller ones) and their 12 labor unions representing some 145,000 unionized rail workers….. “The Board shall report to the President with respect to the disputes within 30 days of its creation, [during which] no change in the conditions out of which the disputes arose shall be made by the parties to the controversy, except by agreement of the parties.”

By the end of this 30-day investigative period, the PEB will issue non-binding recommendations for settlement. The sides will then have 30 additional days—extending to Sept. 18—to reach a voluntary settlement based on those recommendations.

If no agreement is reached, the Railway Labor Act has run its course and unions may strike or management may lock out. Typically, in such situations, Congress acts quickly to write a back-to-work order that also typically contains third-party and binding settlement terms.

Biden appoints all the members of the PEB, so his choices will be closely watched. (Here is Biden’s Executive Order.) But holy moley. Congress writes a back-to-work order? Between September 18 and the midterms on November 8? (To be fair, a crippled supply chain will concentrate their minds. Nevertheless.)

To reduce the complex to the simple: Railroad labor law is designed to disempower workers by nullifying their ability to strike.

NOTE: Railroad union leadership seems to view moving the stately process of negotiation onwards to the PEB as a victory; they pleaded for it. I’m not going to cover union leadership in this post because if I did I’d probably stroke out. But WSWS has a lot of good stuff.

Railroad Unions Are Complex

There sure are a lot of them. From the International Association of Sheet Metal, Air, Rail and Transportation Workers:

The unions comprising the Coordinated Bargaining Coalition are: the American Train Dispatchers Association (ATDA); the Brotherhood of Locomotive Engineers and Trainmen / Teamsters Rail Conference (BLET); the Brotherhood of Railroad Signalmen (BRS); the International Association of Machinists (IAM); the International Brotherhood of Boilermakers (IBB); the National Conference of Firemen & Oilers/SEIU (NCFO); the International Brotherhood of Electrical Workers (IBEW); the Transport Workers Union of America (TWU); the Transportation Communications Union / IAM (TCU), including TCU’s Brotherhood Railway Carmen Division (BRC); and the Transportation Division of the International Association of Sheet Metal, Air, Rail, and Transportation Workers (SMART–TD).

The Brotherhood of Maintenance of Way Employes Division and SMART Mechanical Unions are also bargaining as a coalition.

Collectively, these Unions represent approximately 115,000 railroad workers covered by the various organizations’ national agreements, and comprise 100% of the workforce who will be impacted by this round of negotiations.

This long list — I count fourteen — reminds me of nothing so much as the myriad of German petty states, ecclesiastical principalities, and free cities of the Holy Roman empire. I’m sure there’s a lot of hallowed history here, but aren’t there a lot of cats to herd? Clearly, these institutional structures have failed to protect workers:

The Surface Transportation Board, the federal agency that regulates the railroad industry, said that the largest railroads laid off so many workers in the past six years that the industry’s overall workforce dropped 29 per cent.

Reducing once again the complex to the simple: Why isn’t there one union of all railroad workers? (Leaving aside the more generic question: Why is there not one big union?)

The Railroad Business Model Is Complex

Six of the seven Class 1 railroads practice Precision Scheduled Railroading (PSR), with Warren Buffet’s privately held BNSF the one holdout[1]. PSR was devised by the late Hunter Harrison, who helmed the Illinois Central Railroad, Canadian National Railway, Canadian Pacific Railway, and CSX Corporation, dying in the saddle at CSX.

Needless to say — hold on to your hats, here, folks, the customers are saying that PSR does not provide service, assets are not maintained, safety is not the top priority (“schedule,” as suggested by the name, takes pride of place), and people are not being cultivated (or if cultivated, they’re leaving in droves, whether fired or because they can’t stand it.

Technically, PSR reconcieves railroad network design: As airlines (from the perspective of the passenger) were once point-to-point, but changed under deregulation to hub-and-spoke, railroads were once (from the perspective of the freight car) hub-and-spoke, but changed to network. One question is whether it’s as easy to “schedule” freight car drop-off and pick-up with the “precision” of air travel; the answer seems to be no, although as we shall see, that doesn’t matter very much to the railroad owners.

Here is what management will tell you PSR is, from Trains:

In his book, “How We Work and Why,” published while he was chief executive at CN, Harrison outlined five guiding principles. They are:

● Provide Service: Do what you say you’re going to do.

● Control Costs: Eliminate unnecessary costs.

● Optimize Assets: Use assets more efficiently and productively.

● Operate Safely: Safety is the top priority.

● Develop People: Cultivate the best team of railroaders.

You’ll see nearly identical versions of these foundations on the websites of the Class I PSR systems

As things turn out, however, Harrison’s bafflegab boils down to optimizing a time-honored railroading metric called the Operating Ratio (OR):

Through both the benefits and challenges that accommodate this methodology, the ultimate goal is to achieve a lower operating ratio (OR) – the industry’s most widely used measure of operational efficiency.

At the end of the day, consolidating networks, eliminating less efficient lanes, increasing speeds and sizes of trains, and reducing payrolls are all in the name of decreasing ORs. The OR is the most common metric used to measure the success rate by a railway’s investors. The operating ratio represents how much a company needs to spend to make a dollar.

In other words, if a railway’s operating ratio is 60—the common level most railways implementing PSR aim to achieve—the company would make 40 cents for every 60 cents spent. A variety of strategies can decrease OR like decreasing the workforce costs, removing older trains or railcars from the fleet, and implementing newer more efficient equipment and technology, as mentioned above. PSR is the most popular and lucrative means of decreasing OR.

However, this focus on OR may have certain drawbacks because the priority is placed on short term gains.

“Certain drawbacks” is delicately put! Alert reader Upstater translates the simple into the complex:

Precision Scheduled Railroading] is basically an Orwellian term for massive reductions in physical plant, employment, abandonment of whole business sectors, asset stripping and massive executive compensation schemes.

You say “massive executive compensation schemes” like that’s a bad thing! (Wall Street, of course, loves PSR).

The Railroad Workplace is Complex (Irreducibly So)

This Politico headline tells you a lot about the state of contemporary journalism, so-called: “The supply chain’s little-known weakest link: Railroad workers.” Ah, well, nevertheless.

We noted that the start of this post that trains are big. Long, very long trains are one outcome of the quest for OR driven by PSR. From Peter DeFazio (D-OR) in Fortune:

One of the many impacts of PSR is the uncontrolled growth in train lengths. A U.S. Government Accountability Office (GAO) study found that between 2008 and 2017, train length grew by 25% for two Class I railroads (which comprise the seven largest railroads in the U.S.), and officials from each Class I stated they operate longer trains, including some that extend for several miles. Freight railroad investor calls continue to boast annual train length increases every year.

Fazio, being a Democrat, naturally focuses on traffic jams and not workers, so let us remedy that

PSR means longer trains, and longer trains mean more derailments. From Railway Track and Structures:

Precision scheduled railroading (PSR) has introduced a new dimension and meaning to the old adage, “Uphill Slow, Downhill Fast, Profits First, Safety Last ,” too wit. Gravity carries great sway over train speeds on river (level) grade, ascending and descending railroad trackage. Everyone who manages train operations or operates trains knows that, and the following: Short trains are easier to operate than long trains, no matter what the grade. If you are operating a train over long descending grades, or long ascending grades, followed by long level grades, there are relatively few in-train forces, slack action, run-in, run-out. But, if you are operating a train over undulating trackage, commonly referred to as hog-backs, where I come from, you have a whole new ballgame, one that increases the probability of an accordion-like derailment[2].

Normal is the type of trains they ran before PSR. If you expect them to get your monster trains over the road safely and efficiently, you might want to invest a little more time in education and training, even if that adds a smidgen to your operating costs.

Of course, education and training cut your OR, and who wants that? Education and training also imply a greater degree of employee retention than the railroad firms are currently able to achieve

PSR means fatigue, and fatigue means accidents. From the AFL-CIO’s Transportation Trades Department:

Rather than maintaining appropriate staffing levels, carriers are mandating overtime for workers who are already stretched thin. In an industry where fatigue is a constant risk factor, exposing employees to additional fatigue by asking them to work longer and faster while performing multiple jobs is a recipe for disaster.

(There are also issues of getting workers from where they are sleeping or living, to the train to which they have been assigned; they aren’t paid for this time.)

PSR means decreased inspection, and decreased inspection means accidents. From Freight Waves:

Another change is PSR’s impact on the timing of the inspections, according to Randy [(a signal maintainer)]. Because the trains run on a fixed schedule, the dispatchers are reluctant to give the signal maintainers the time they need to conduct a thorough inspection because they don’t want to delay the trains.

Management: We don’t need no steenkin’ signals!

[Jason] Cox argues that carmen aren’t given enough time to inspect the railcars because of the drive to keep the trains’ schedule. Inspectors used to take up to three minutes per freight car but have now been encouraged to take one minute per car, according to Cox. That time includes the amount of time to walk around the equipment, he said.

You see the size of those cars. This isn’t possible.

Finally, PSR means violating craft boundaries, which means unskilled people doing skilled work. Again from the AFL-CIO:

Carriers are also compensating for reduced staffing by requiring remaining employees to perform work outside their craft in addition to fulfilling their regular duties. At best, this may involve employees performing tasks with which they are not experienced. At worst, employees may be forced to do work for which they are not qualified….

One responding machinist reported being sent, by himself, to work with dangerous and heavy equipment that once required two workers, and expressing fear that no one would know to call for help if he was injured. A carman wrote that at his yard, management now demands brake inspections be performed at the extraordinary and unsafe pace of just 60 seconds per car. Employees of both crafts say critical safety rules designed to protect employees from being hit by equipment are being ignored in the name of speed. Numerous employees stated that re-shift safety briefings—a common industry practice—are being eliminated in order to better utilize man-hours. And commonly, carmen are being forced to ignore FRA defects. One consistent theme emerged throughout the responses: railroads value getting trains moving and moving quickly above all else, including safety.

Finally, the railroad firms would like to move to “Single Employee Train Operations.” Look again at the picture; this is obvious lunacy. Railroad Workers United raises the obvious safety issues:

Without a second crew member to assist the train operator, an endless number of distractions would come into play. The lone crew member would now not only have to operate the locomotive, but would also have to do all of the talking on the radio, not just with the train dispatcher, but with signal maintainers, gang foremen, other train crews, etc. The single operator would be responsible for properly giving a visual look-over or “roll by” to other trains that are met and passed. And the single crew member would be responsible for all paperwork including the train’s manifest and the position of all hazardous materials in the train. Currently these duties fall to the conductor, thereby alleviating the train’s engineer from the muti-layered distractions that this work can cause, taking the engineer’s attention away from the immediate task at hand – running the train.

But more subtly:

With a single employee crew, valuable mentoring time would be lost. Many conductors work for years in the left hand seat, gaining valuable understanding of the signal system, operating rules, air brake system, etc., long before they ever become an engineer. Without the two person crew, this “university” will be lost forever, and the entire operating employee workforce would over time invariably become less professional, less seasoned, and less safe. And this loss of education that surely would ensue by running single employee trains would have a detrimental effect on all operating employees, not just those who are new or inexperienced. The lack of two employees in the cab means a lack of informal conversation, reflection, storytelling, discussions of rules and signals, etc. Much of the learning that takes place every day a railroad worker goes to work is in the cab of the locomotive, as the two employees share their collective knowledge, experience and wisdom that each has acquired over the years. Without the two person crew, this ongoing day-to-day classroom is lost.

So PSR, in addition to gutting the workforce, is making the workers who remain more stupid.

Conclusion

In fact, a strike seems unlikely, even to the workers who voted overwhelming for it. From Jason Furman:

The Brotherhood of Locomotive Engineers and Trainmen, a Teamsters affiliate and one of a dozen and a half unions involved in national rail bargaining with the largest freight carriers, are taking a national strike vote. The vibe I get from workers I’m in touch with is that… a national rail strike is never going to happen (depending on who you ask having to do with the Railway Labor Act and its reliance on a Presidential Emergency Board, or because the unions just could never actually get organized to pull it off in their sorry state, or because the rail union leaders just don’t have it in them)… The upshot is nobody really thinks 120,000 railroaders are going to strike in a midterm year during a supply chain crisis but then again people keep being wrong about things.

So far, the contract talks have not gone well, so it’s unclear what value the PEB will add:

The contract talks remain mired in mediation while the railroads pursue unpopular proposals to cut rail crews from two people down to one in certain circumstances. The unions also don’t want to make major concessions in workplace rules after seeing nearly one-third of all railroad jobs eliminated over the past six years as the major freight railroads have overhauled their operations.

(I did manage to find one contract proposal, but oddly the question of “Single Employee Train Operations” was not addressed, which is either goofy or ignorance on my part of how contract negotiations proceed.)

Once again, if workers could strike, they would have extraordinary leverage:

There hasn’t been a rail shutdown in the U.S. since 1992, when machinists at CSX Transportation went on strike. Their work stoppage actually shuttered all American rail operations, including passenger service, which operates on some freight rail. At the time, the White House estimated that the shutdown cost Americans $1 billion per day, or more than $2 billion in today’s dollars.

The 1992 strike, just two days long, was still incredibly disruptive. The Chamber of Commerce fears that a work stoppage this time around could be similarly crippling. “Any breakdown would be disastrous for U.S. consumers and the economy and potentially return us to the historic supply chain challenges during the depths of the pandemic,” wrote Suzanne P. Clark, CEO and president of the Chamber of Commerce, in a July 8 letter to the administration.

On the Trillbillies podcast (starting at 23:39) music star Sturgill Simpson[3] describes one of the jobs he had:

I worked for Union Pacific. I started out as a conductor at an intermodal switching facility outside of Salt Lake City. We’d pull in trains from all over the country, break them apart, consolidate the freight, and build other trains. It was great until I screwed up and took a management position. Then it became no fun very quickly.

Simpson also describes the pressures of the job: If a train was as little as fifteen minutes late, shippers would call, generally yelling. It strikes me that “Precision” “Scheduled” railroading would be highly vulnerable to wildcat strikes at strategically located yards. Or accidental derailments at the throats of said yards. Something to watch for?

NOTES

[1] From Freight Waves:

If BNSF was publicly traded, it is likely that management would be pressured by activist shareholders to adopt a more PSR-like approach to cost management. There might even be an attempt by shareholders to replace the management by proxy with managers with “PSR experience.” That was the case referenced above with Canadian Pacific Railway in 2011-2012 as a proxy battle led by Pershing Square Capital Management replaced CEO Fred Green with Hunter Harrison. But, we’ll likely never know, assuming that Berkshire Hathaway holds on to BNSF for an extended period of time.

Pershing Square Capital Management is a hedge fund run by Bill Ackman.

[2] We saw one such recently at Santa Fe Junction, in Kansas City, MO.

[3] I lifted the extremely dry “that’s a damn shame” from Sturgill Simpson.