The railroad strike, and the economic damage it would cause, is closer

New York
CNN business

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

While two other train unions reached tentative agreements on new contracts with railroad management on Tuesday, the two major unions — which represent engineers and conductors who make up two-person crews on each train — remain in the thick of negotiations. If they fail to resolve their differences, the first national rail strike in 30 years could begin as early as Friday.

Those engineer and conductor unions make up about half of the 100,000 unionized workers on the nation’s major freight railroads. Without them working, those trains won’t run, nor will many of the commuter and Amtrak trains that run over the freight rail lines. In fact, Amtrak has already canceled some of its routes.

Unable to reach an agreement Tuesday, the leaders of the two unions and negotiators from the railroad’s bargaining team are scheduled to meet with Labor Secretary Martin Walsh in Washington early Wednesday, officials from each union and a Labor Department spokeswoman said.

Administration officials have become increasingly concerned about the prospect of a strike in recent days. President Joe Biden personally called railroad unions and businesses while visiting Boston on Monday in an effort to avoid a train shutdown, White House press secretary Karine Jean-Pierre told reporters.

CNN reported earlier Tuesday that the White House is discussing contingency plans as agencies across the federal government consider how they can use federal authority to keep critical supply chains operating while labor talks remain at an impasse.

“The White House is working with other modes of transportation (including carriers, truckers, air freight) to see how they can get goods in and keep moving if the rail is shut down,” a White House official told CNN on Tuesday.

But there is no alternative to moving freight transported by rail. The American Trucking Association issued a statement saying it would need 460,000 more long-haul trucks per day, saying it was “not possible given equipment availability and the existing 80,000 driver shortage.” He urged Congress to act to keep railroad workers on the job, saying the trucking system itself depends on sharing shipments with the railroads.

Railroads operate under a special labor law that allows the federal government to intervene to keep workers on the job, rather than allowing management to freely strike or lock out workers.

President Biden blocked the strike through executive action in July, which delayed the possibility of a strike for 60 days. He also appointed a committee, known as the Presidential Emergency Committee, which made recommendations for a deal that most unions have accepted.

But not the engineers and managers, the scheduling rules that keep them “on call” almost every day they don’t work, as well as the shortage of staff, make their work life unbearable. These rules were not addressed by the emergency committee. Without changing these rules, the engineers and managers say they will go on strike. The 60-day rest period ends at 12:01 a.m. Friday, so a strike is threatened.

Unless the two sides can reach an agreement, only action by Congress can prevent or end the strike. Richard Durbin, the second-ranking member of the Senate Democratic leadership, told CNN that Democrats are reluctant to take action before the deadline to avoid a strike.

“I don’t think we’re likely to intervene,” Durbin said. Avoiding a strike “depends on the negotiating parties stepping up to the plate.”

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

A strike would be a devastating blow to the US economy, which is still struggling with supply chain issues. Approximately 30% of the nation’s freight is moved by rail. Problems can include:

  • Gasoline: Without freight rail, oil refineries would struggle to produce today’s gasoline volumes, which could raise gas prices, ending a three-month streak of falling prices at the pump.
  • Food: It can disrupt the nation’s food supply by preventing recently harvested crops from being transported to food processors and disrupting the supply of fertilizers needed for upcoming plantings.
  • Consumer goods: According to the National Retail Federation, any rail strike could have negative effects on the import of goods for the holiday shopping season, leading to shortages and higher prices.
  • Cars and Trucks: Car prices have already hit record highs this year due to a limited supply of new vehicles due to a shortage of new computer chips and other parts. A rail strike would further choke off 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 new finished cars and trucks, 75% of which move by rail.

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

“Costs will grow geometrically the longer the strike lasts,” he said. “After a week, you would see real damage to the US economy.”

He said the rail trade group’s estimate of $2 trillion a day in economic damage was a “gross exaggeration” but that the significant costs would spread throughout the economy. “If we get to a one-week strike, we are in unknown territory,” he added.

The emergency committee has recommended an immediate 14% raise to union members, including the delay of some of those raises until 2020. Employees would also receive a 24% raise over the five-year term of the contract, and a $1,000 annual bonus.

But engineers and managers say the strike is about more than pay; working conditions and schedules force their members to leave their jobs, and railroads are left with understaffed workers who make conditions unbearable for other workers. Unions that have accepted the deal do not have the scheduling problems that engineers and managers have.

The railroads say average employee compensation is $122,000 a year, including salary and benefits. But the railroads themselves have also been very profitable, with several of them — Union Pacific ( UNP ), Norfolk Southern ( NSC ) and Berkshire Hathaway’s ( BRKA ) Burlington Northern Santa Fe — reporting record profits.

Some congressional Republicans say they are preparing legislation that would impose a contract on the engineers’ and managers’ unions to force them to stay on the job.

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

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

Through their trade group, the Association of American Railroads, the railroads say requests by engineer and conductor unions to change scheduling rules “must be dealt with locally” and not through national bargaining. It has been stated that the PEB “explicitly rejected” the request of the unions to have this change in the national contract.

For its part, the management of the engineers and conductors unions said that their members will not ratify an agreement that does not include changes in the work rules. Both unions say they have already reduced their demands in an attempt to reach an agreement.

The unions also say that a strike is the best way to reach an agreement that will win the support of their members and improve the quality of rail service nationally. The railroads say they are counting on Congress, which would eliminate for now the hiring of additional workers that union leadership says.

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