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Why Are Railroad Unions Threatening to Strike?

The US economy is facing the first national rail strike in thirty years as freight railroads and labour unions are failing to reach a new contract agreement. Whilst a pay increase is on the table, unions are insistent they will not agree to a new deal without significant quality of life provisions included for their members.

Although President Biden successfully delayed strike action two months ago, imposing a cooling-off period, that period is set to expire on Friday. If a deal is not reached by midnight on September 16 workers can walk off the job. To break this impasse, the Presidential Emergency Board (PEB) recommended a compromise pay rise that would result in an effective 24 per cent pay increase between 2020 rates and 2024. On top of this, workers would receive an annual cash bonus of $1,000.

However, while eight of twelve unions have agreed improved contracts, the two most significant unions - the Brotherhood of Locomotive Engineers and Trainmen (BLET) and the International Association of Sheet Metal Air, Rail, and Transportation Workers – are holding firm. These unions account for more than 90,000 rail employees out of a total of 120,000.

The unions argue that working conditions are “destroying the lives” of their members. The requirement for many to be on call seven days a week ultimately prevents workers making their own plans, reduces time with their families, and contributes to the high turnover rate in the industry.

“This isn’t a personal choice by the presidents of the unions,” said BLET President Dennis Pierce. “Our membership has made it loud and clear that this is not a deal membership would ratify.” Workers can be on call for fourteen consecutive days without a break, for up to 12 hours, and are afforded no sick days.

One conductor said he nearly missed his wife’s funeral because he could not get time off whilst another faced disciplinary action after having to stay home to fix a broken water heater. Ron Kaminkow, a BLET member, commented; “It’s about [when] the phone rings at 2 a.m. to be at work at 4 a.m. after just 10 hours of rest prior. It’s about not knowing when you’re coming home and being penalized with discipline up to firing if you need to go to the doctor.”

Workers feel particularly aggrieved as freight railroad profits soared during the pandemic while the workforce on major lines was cut by a total of 29% across the last six years. Several railroads, including Union Pacific (UNP), Norfolk Southern (NSC) and Berkshire Hathaway (BRKA)’s Burlington Northern Santa Fe have recently reported record earnings.

This potential walkout would constitute the first national rail strike since June 1992, and will have a devasting impact on the US economy. The strike may shut down 30 per cent of the nation’s freight, halt most passenger rail services, and cost the economy more than $2bn a day.

Roughly 40 per cent of the nation’s long-distance trade moves by rail and the daily disruption caused by 7,000 idle trains would lead to retail product shortages and manufacturing shutdowns. The Agricultural Transportation Working Group, a collection of 31 organisations, warned such disruption would “drastically make inflation worse”.

The trucking industry insists it does not have the capacity to make up the shortfall which would require 467,000 additional long-haul trucks daily at a time when there is a shortage of 80,000 drivers.

Consequently, there is growing pressure on Congress to take action. With President Biden having already intervened, it is only Congress that has the power to either impose contract terms on the parties or to introduce an additional cooling-off period.

However, such action has its own complexities. Congressional action would require significant bipartisan cooperation, but Democrats are cautious of steamrolling unions given the Administration’s strong pro-union posture.

The White House has held a number of emergency meetings and US Labor Secretary Marty Walsh postponed travel plans to Ireland to remain for talks with unions. "The parties continue to negotiate, and last night Secretary Walsh again engaged to push the parties to reach a resolution that averts any shutdown of our rail system," a Labor Department spokesperson said. "All parties need to stay at the table, bargain in good faith to resolve outstanding issues, and come to an agreement."

There is significant concern within the White House that major disruption will hurt the Democrats in November’s important midterm elections. “The last thing they want right now is a major strike in a key sector like this,” said Dean Baker, a White House ally, economist and co-founder of the Center for Economic and Policy Research. “I think Biden is going to be pushing really hard to get a deal. He’ll presumably push on the employer side but I’m sure he’ll push the union side as well ... though there’s a question of how hard he’ll be willing to push the workers.”

A rail labor union spokesperson, speaking to CNBC, urged Congress to favour workers over industry. “The railroads cannot legally lock us out so they are resorting to the extortion of the shippers. Impacting the supply chain so the shippers will go to Congress demanding intervention. Congress must not cave.”

To mitigate the strike’s impact, BNSF, owned by Berkshire Hathaway and CSX said they were taking necessary steps to secure the shipments of hazardous and security-sensitive materials in the event of a strike.

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