Railroad strike, and the economic damage it would cause, looms closer

By Chris Isidore and Vanessa Yurkevich, CNN Business

A freight railroad strike, and the economic upheaval it could cause, is getting closer and closer to reality.

While two more rail unions reached tentative agreements with railroad management on new contracts Tuesday, the two most important unions — representing the engineers and conductors who make up the two-person crews on each train — remain at loggerheads in negotiations. If they don’t resolve their differences, the first national rail strike in 30 years could start early Friday.

Those engineers and conductors unions represent roughly half of the more than 100,000 unionized workers at the nation’s major freight railroads. Without them on the job those trains will not run, nor will many commuter and Amtrak trains that run over freight rail lines. Indeed, Amtrak has already suspended some of its routes.

Unable to reach a deal Tuesday, the heads of the two unions and the negotiators for the railroads’ bargaining team are scheduled to meet with Labor Secretary Martin Walsh in Washington early Wednesday, according officials with each union and a Department of Labor spokesperson.

Administration officials have grown increasingly concerned about the possibility of a strike in recent days. President Joe Biden personally called rail unions and companies on Monday while visiting Boston in an attempt to avert a rail shut down, White House press secretary Karine Jean-Pierre told reporters.

CNN reported earlier Tuesday that the White House is urgently discussing contingency plans, with agencies across the federal government working through how they could potentially use federal authority to keep critical supply chains operational as labor talks continue to sit at an impasse.

“The White House is working with other modes of transportation (including shippers, truckers, air freight) to see how they can step in and keep goods moving, in case of a rail shutdown,” a White House official told CNN on Tuesday.

But there are no alternatives to move the freight carried on rail. The American Trucking Associations issued a statement saying that it would require more than 460,000 additional long-haul trucks every day, which it said “is not possible based on equipment availability and an existing shortage of 80,000 drivers.” It called on Congress to act to keep the railroad workers on the job, saying the trucking system itself depends on sharing shipments with the railroads.

The railroads work under a unique labor law that allows the federal government to intervene to keep the workers on the job, rather than freely allowing a strike or a lockout of workers by management.

President Biden blocked a strike through executive action in July, which delayed the possibility of a strike for 60 days. He also appointed a panel, known as a Presidential Emergency Board, which came up with recommendations for a deal that has been accepted by most of the unions.

But not the engineers and conductors, who say scheduling rules that keep them “on call” virtually every day they’re not at work, as well as a staffing shortage, make their work lives intolerable. Those rules were not addressed by the emergency board. Without a change in those rules, the engineers and conductors say they’ll go on strike. The 60-day cooling off period is set to expire at 12:01 am ET Friday, so that threatened strike is looming.

Will Congress act to stop strike?

Unless the two sides reach an agreement, only Congressional action can prevent or end a strike. Richard Durbin, the second highest ranking member of the Democrats’ leadership in the Senate, told CNN that Democrats are not eager to take action ahead of the deadline to prevent a strike.

“I don’t think it’s likely we will intervene,” Durbin said. Avoiding a strike “depends on the parties in negotiations stepping up to the plate.”

Railroad management and numerous business groups, including the US Chamber of Commerce and the National Retail Federation, are calling on Congress to act to prevent a strike.

Widespread economic impact

A strike would be a crippling blow to the US economy, which is still struggling with supply chain problems. Roughly 30% of the nation’s freight moves by rail. Among the problems could be:

• Gasoline: Without freight railroads, oil refineries would have trouble producing their current volumes of gasoline, which could send gas prices higher, ending a string of three months of falling prices at the pump.
• Food: It could disrupt the nation’s food supplies, preventing recently harvested crops to move to food processors and disrupting the supply of fertilizer needed for upcoming plantings.
• Consumer goods: According to the National Retail Federation, Any rail strike could have long-lasting negative effects on the import of goods for the holiday shopping season, causing shortages and higher prices.
• Cars and trucks: Car prices have already hit record prices this year due to the limited supply of new vehicles caused by a shortage of computer chips and other parts. A rail strike would further choke supplies, cutting off the delivery of auto parts to auto assembly plants, which could force temporary shutdowns at some plants. It would also disrupt the flow of completed new cars and trucks, 75% of which move by rail.

The full economic impact would not be immediate, said Patrick Anderson, of Anderson Economic Group, which does economic impact estimates for work stoppages, although it would likely cost the economy tens of millions of dollars a day at the start.

“The costs will grow geometrically the longer the strike lasts,” he said. “After a week, you’d see real damage in the US economy.”

He said an estimate of $2 billion a day of economic damage from the railroad’s own trade group is “gross exaggeration” but that significant costs will spread throughout the economy. “If we reach a week-long strike, we’re in uncharted territory,” he added.

Not about pay

The emergency board recommended an immediate 14% raise for union members, including backpay for some of that raise going back to 2020. Workers also would receive a 24% raise over the five-year life of the contract, and $1,000 annual cash bonuses.

But the engineers and the conductors say the strike is not over pay; the work conditions and scheduling are driving their members to quit jobs, leaving the railroads with a staffing shortage that makes conditions for the remaining workers intolerable. The unions that have accepted the deal do not have the scheduling issues that the engineers and conductors face.

The railroads say that average compensation for their employees comes to $122,000 per year, including both pay and benefits. But the railroads themselves also have been very profitable, with several of them — Union Pacific, Norfolk Southern and Berkshire Hathaway’s Burlington Northern Santa Fe — reporting record earnings.

Republicans want Congressional action

Some Republicans in Congress say they’re preparing legislation that would impose a contract on the engineers and conductors unions to force them to stay on the job.

“A rail worker strike would be catastrophic for America’s transportation system and our already-stressed supply chain,” said Sen. Richard Burr, the North Carolina Republican and one of two senators who plan to introduce the legislation. (The other is Republican Roger Wicker of Mississippi.)

Burr said the PEB recommendations, which form the basis of the contract his legislation would impose, “are a fair and appropriate solution to a years-long negotiation process, but labor unions are continuing to hold the entire nation’s rail system hostage as they demand more.”

Through their trade group, the Association of American Railroads, the railroads say the engineers and conductors unions’ demands to change the scheduling rules “should be dealt locally” and not through national bargaining. It pointed out that the unions” demand to have the change as part of the national contract was “expressly rejected” by the PEB.

For their part, the leadership of the engineers and conductors unions’ said their members would not ratify any deal that doesn’t include changes in the work rules. The two unions say they have already reduced what they are asking for in an effort to get the deal done.

The unions also say that a strike is the best way to get a deal that will win support of their members and improve the quality of rail service nationwide. They contend the railroads are counting on Congress to step in, which would eliminate for now the hiring of additional staff that union leadership says is needed.

– CNN’s Ali Zaslav and Maegan Vazquez contributed to this report

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