We might be headed for a rail strike by Thanksgiving that could cripple US supply chains and push the economy ‘over the edge’
BYTRISTAN BOVE
November 5, 2022
PHOTO ILLUSTRATION BY FORTUNE; ORIGINAL PHOTO BY GETTY IMAGES
Two months ago, America narrowly avoided a U.S. rail worker strike that could have brought supply chains to a standstill and crippled the economy. Now, that option is back on the table.
In September, four unions representing around 60,000 rail employees reached tentative agreement with rail companies in September—with the assistance of the Biden administration—that averted a nationwide strike. But last week, the Brotherhood of Railroad Signalmen (BRS), a rail worker union, voted against ratifying that agreement. Over 60% of the union’s rank and file members voted against it, with the lack of paid sick days being the main sticking point.
“For the first time that I can remember, the BRS members voted not to ratify a National Agreement, and with the highest participation rate in BRS history,” Michael Baldwin, the group’s president, wrote in a statement on Oct. 26.
The BRS is not alone in being unsatisfied with September’s tentative agreement. They join the Brotherhood of Maintenance of Way Employes Division (BMWED)—the third largest rail union in the country—which also voted against the agreement on Oct. 10.
The two unions are still negotiating with railroad companies over a resolution, but time is running out. Without government intervention, rail workers could in theory begin striking if a deal isn’t reached by Nov. 19, a spokesperson for the BMWED told Fortune.
If it does come to a strike, it could have big implications for the U.S. economy. The averted September strike could have cost the country as much as $2 billion a day in supply chain disruptions that would aggravate soaring inflation, according to a study by the Association of American Railroads (AAR), and experts tell Fortune a strike now would have a similar if not greater impact, given the upcoming holiday season.
A strike just ahead of Thanksgiving, and the beginning of the busiest shipping season for retailers, could derail the “main artery” of the U.S. economy, Daraius Irani, chief economist at Towson University’s Regional Economic Studies Institute and railroad economics expert, told Fortune. It could even provide kindling to the smoldering fire of the U.S. recession many economists predict is on the way.
“We’re already facing a supply chain crisis, and now with this on top of it, it could just be a fast accelerant towards a recession,” Irani said. “This would be one of those things that push the economy towards an inflationary recession.”
Railroad grievances
While railroad unions would rather avoid a strike, they are nonetheless determined to have their demands met.
Rail workers have expressed their grievances about being overworked and understaffed, placing companies’ strict and demanding attendance policies front and center in the labor dispute. Workers have complained about being forced to work on weekends and days they are sick under threat of punishment, with many frequently on call 24 hours a day, seven days a week.
Negotiations for better working conditions between railroad unions and companies have been ongoing since 2020, and the tentative agreement reached in September addressed some union concerns over wages. The agreement included a 24% wage increase over a five year period retroactive to 2020, in addition to a one-time payout of $11,000 on average to each ratifying member.
Some rail unions have ratified the agreement, but the BMWED and BRS have held firm on their demands over more expansive sick leave provisions. The current, tentative agreement in place only provides one additional day of paid leave to workers.
“It’s an insane and cruel system, and these guys are fed up with it,” Peter Kennedy, BMWED’s chief negotiator, told the New York Times last week.
Kennedy did not directly respond to Fortune’s request for comment, although a BMWED spokesperson told Fortune that their union members have grown “tired and discouraged and upset” after being worked hard throughout the pandemic by rail companies, who are now playing hardball on sick leave.
Both the BMWED and the BRS have said that a rail strike is not their preferred outcome.
“It’s not the end goal. It’s not the desired goal. The desired goal is a fair contract that lends credence to the tributes that the railroads heaped onto our members at the outset of the pandemic,” the BMWED spokesperson said.
The BRS also says it wants to avoid a strike, president Baldwin told Fox Business on Tuesday, adding that the union intended to cooperate in “good faith” with rail companies.
But both unions are still prepared for a worker stoppage later this month if negotiations do not go according to plan. The BMWED spokesperson confirmed to Fortune that bargaining talks between that union and rail companies are currently at a “standstill” and striking is still an outcome it is “planning for.”
‘Over the edge’
If a strike does happen, it would be devastating for the U.S.
“Transportation affects so many parts of our economy,” Clifford Winston, a senior fellow at the Brookings Institution whose research focuses on transportation and industrial organization, told Fortune.
“We’ve seen these things any time there’s a disruption in rail services in the past. It’s been bad, and obviously right before the holidays, it will be even worse,” he added.
A nationwide strike and rail disruption would cripple the U.S. economy’s ability to move around goods quickly and efficiently. Railroads account for 40% of all long-distance freight volume in the U.S.—more than any other transportation mode. Without them, it would take 99 million additional trucks traveling on public roadways and four times as much fuel to move the same amount of freight, according to the AAR.
“Anytime a transportation mode is knocked out of business, so to speak, it’s a huge cost. And the public takes us for granted until it happens,” Winston said.
With railroads ferrying large volumes of consumer goods, fuel, and food products that Americans rely on every day, a shutdown could have immediate and severe effects on inflation and the economy at large.
“There would probably be some immediate increases in prices as suppliers begin to realize that they’re going to be facing shortages,” Towson’s Irani said, adding that it would “add fuel to the inflationary effects we’re already feeling now.”
Inflation in the U.S. is currently running at an annual rate of 8.2%, with rising costs becoming top of mind for most Americans in the run-up to next week’s midterm elections. Rising costs for everyday items including food and fuel has made life more difficult for many in the U.S., where a growing number of people are struggling to pay their bills and cutting back on expenses.
“The economy was shaky already. And now this could kind of push it over the edge,” Irani said.
Chance for a resolution
If rail unions wanted to have most of their demands met, they could hardly have picked a better time to stage a potential walkout.
The severe consequences a strike would have on an already-struggling economy, combined with a pro-labor administration and the looming holiday shipping season, mean that workers have most of the leverage right now and could push the government to get involved again, Raymond Robertson, a labor economist and director of the Mosbacher Institute for Trade, Economics, and Public Policy at Texas A&M University, told Fortune.
“This administration is much more pro-labor than the previous ones,” Robertson said, adding that because of the upcoming holiday season, the federal government is likely to help move along negotiations again as the administration did in September.
Congress does have the power to step in and order rail workers not to strike for a certain period of time, but the White House has signaled that unions and companies should be the ones to come to an agreement, and that government intervention may not lead to a permanent resolution to the problem.
“It is the responsibility of the parties involved to resolve this issue,” White House Press Secretary Karine Jean-Pierre said last week. “Any idea that kicking this to Congress will result in a quick or favorable outcome is deeply misguided.”
Jean-Pierre said that while the administration remains “laser-focused” on avoiding a strike, the unions and companies still have “additional work to do” before one is definitively ruled out.
The unions and rail companies will return to the bargaining table next week to attempt another deal.
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