Early Thursday, Joe Biden expressed gratitude to rail workers for striking… an eleventh hour deal to avert a strike.
“I thank the unions and rail companies for negotiating in good faith and reaching a tentative agreement that will keep our critical rail system working and avoid disruption of our economy,” he said, in a statement. Rail workers will get “better pay, improved working conditions and peace of mind around their health care costs.”
A labor department spokesperson said the agreement “balances the needs of workers, businesses and the nation’s economy.” Labor Secretary Marty Walsh led negotiations this week. Had the talks collapsed, 125,000 freight-rail workers would’ve walked off the job. Although 10 of 12 unions reached deals previously, this was an all-for-one, one-for-all sort of thing — if the two holdouts, which together represent nearly 60,000 workers, were unable to come to terms, everyone was prepared for a walkout.
The cost of a strike (which would’ve been first of its kind in three decades), is impossible to quantify with anything like precision due to second-order effects, especially at a time when supply chain problems are pervasive and inflation rampant. Estimates of the impact suggested the economy would lose $2 billion per day. There are around 7,000 long-distance freight trains in the US. Offsetting a total stoppage would entail marshaling nearly half a million long-haul trucks per day, an impossibility, particularly given labor shortages in the industry.
Commodities, which comprise around half of US freight-rail traffic, already reflected the risk of a strike. On Wednesday, for example, natural gas spiked as negotiators appeared to make little progress. A prolonged impasse would impact coal deliveries, compelling power generators to switch to gas, which is, of course, being pulled in all directions this year amid tight supplies and the war in Ukraine. Barge-loaded corn traded at a higher premium earlier this week, as markets warily eyed the prospect of additional strain on an already overburdened grain-barge system. Gas prices, which recently notched a 90th consecutive daily decline on a national average basis, the longest streak in seven years, might’ve been impacted too — ethanol moves by rail.
The Labor Department on Thursday said the latest round of negotiations went on for “20 consecutive hours.” The deal was “hard-fought” and “mutually beneficial,” according to the statement, which emphasized that a disruption to the nation’s rail system “would have had catastrophic impacts on industries, travelers and families across the country.”
Amtrak this week canceled some long-haul services on routes which rely on tracks maintained by freight railroads. Chicago’s Metra said it was poised to suspend some services starting Thursday in preparation for a possible strike.
According to Goldman’s Jordan Alliger, the cost to Class 1 operators of a total rail stoppage would’ve been around $1.8 billion for the week. A strike would’ve risked exacerbating inflationary pressures, he added, stating the obvious.
Congress was expected to step in to prevent a total disaster had talks failed. A lengthy disruption was generally seen as non-starter, especially under the political circumstances and in the context of an inflation problem which this week’s consumer price data suggested isn’t getting better.
I was skeptical this week that a worst-case scenario would materialize in America’s rail system. The stakes were too high, and there was latitude for political intervention. That’s why I eschewed the sort of breathless coverage accorded to the drama by at least one mainstream outlet.
That said, the fraught negotiations encapsulated the new macro zeitgeist, defined as it is by threats to supply chains and logistics with potentially severe consequences for commodities and inflation, as well as the nascent restoration of labor’s bargaining power in an environment of scarce workers and fragile economies.
Full White House statement:
The tentative agreement is an important win for our economy and the American people. It is a win for tens of thousands of rail workers who worked tirelessly through the pandemic to ensure that America’s families and communities got deliveries of what have kept us going during these difficult years. These rail workers will get better pay, improved working conditions, and peace of mind around their health care costs: all hard-earned. The agreement is also a victory for railway companies who will be able to retain and recruit more workers for an industry that will continue to be part of the backbone of the American economy for decades to come.
I thank the unions and rail companies for negotiating in good faith and reaching a tentative agreement that will keep our critical rail system working and avoid disruption of our economy.
I am grateful for the hard work that Secretaries Walsh, Buttigieg, and Vilsack, and NEC Director Deese put into reaching this tentative agreement. I especially want to thank Secretary Walsh for his tireless, around-the-clock efforts that delivered a win for the hard working people of the US rail industry: as a result, we will keep Americans on the job in all the industries in this country that are touched by this vital industry.
For the American people, the hard work done to reach this tentative agreement means that our economy can avert the significant damage any shutdown would have brought. With unemployment still near record lows and signs of progress in lowering costs, this agreement allows us to continue to fight for long term economic growth that finally works for working families.
Full statement from the Association of American Railroads
Washington, D.C. – September 15, 2022 – Today, the nation’s freight railroads are pleased to announce that tentative agreements have been reached with the Brotherhood of Locomotive Engineers and Trainmen Division of the International Brotherhood of Teamsters, the International Association of Sheet Metal, Air, Rail and Transportation Workers – Transportation Division, and the Brotherhood of Railroad Signalmen. Collectively representing approximately 60,000 employees, the tentative agreements reached with these unions avert a potential strike in advance of Friday’s deadline.
Thanks to the dedication of all members involved in the collective bargaining process, these new contracts provide rail employees a 24 percent wage increase during the five-year period from 2020 through 2024, including an immediate payout on average of $11,000 upon ratification, following the recommendations of Presidential Emergency Board (PEB) No. 250. All tentative agreements are subject to ratification by the unions’ membership.
The industry would like to thank all unions involved in negotiations for their efforts and dedication to reaching agreements throughout this process. In addition, the industry thanks the Biden Administration, especially Secretary of Labor Marty Walsh, Secretary of Transportation Pete Buttigieg, Secretary of Agriculture Tom Vilsack, and the members and staff at the National Mediation Board, for their leadership and assistance in reaching these settlements.
This feels like the polar opposite outcome from the ATC strike in 1981. Unions doing their job, workers getting their due, and balance for all economic actors.
This isn’t over. It might turn out that it’s over for all practical considerations, but it isn’t over until the Union rank-and-file have voted to accept the deal.
Incidentally, one union, the International Association of Machinists and Aerospace Workers, voted the day before, and they voted to refuse the deal & strike, but with a grace period until September 29 in case things changed.
All the railroad unions have a me-too clause, so anything one union gets they all get. With the new deal announced here, something has changed, so they’ll likely need to re-vote.
That said, the conductors and engineers have been screaming to anyone who will listen (which is perishingly few people) that this isn’t about money, it’s about quality of life issues, specifically the scheduling and on-call system. This deal doesn’t address that, and they may well still decide to vote for a strike.
As H observed, this is an all-for-one type deal. If even one union strikes, that effectively shuts everything down, because no union member will cross another union’s picket line. Even if Unions 1 through 11 vote to take the deal, none of them will be at work if Union 12 votes to strike and picket.
If that happens, Biden has truly screwed himself by crowing about how important and significant this deal is, and by claiming credit. If it falls apart, it’s all on him now, just weeks before the election.
The odds of the White House being this explicit about things while not being at least mostly sure it’s a done deal are very low. Also: Anyone who lets this happen even for a day or two, is a lunatic. This is like allowing the US to technically default. It’s economic suicide. It’s not good for anyone. Especially right now. It can’t be allowed to happen under any circumstances. If it does happen, Congress needs to intervene and the administration needs to take whatever emergency actions are necessary to mitigate the impact. Some issues are more important than politics or any one group of people, whether it’s employers or rail workers. You can’t let the country’s rail system shut down in the middle of a supply chain crisis, with inflation at 8.5%.
I’m glad to learn there is hope for resolving this challenge from the railroads. I miss the days when labor unions stood up to win greater job security and better lives for their constituent families. I do not know what issues were on the table for the unions and railroads, whether it was hourly pay or how to manage the long hours on cross-country trains. Yet I could not help myself in resenting the timing of their threatened action. Unions have unfortunately earned a bad name over a long period of time in many areas of the country, and inspired business models where less expensive, non-union alternatives are enabled.
I would like to see a resurgence of trade unions. Biden is a stated advocate. The railroad workers knew Biden would have to get involved to assist in working out a resolution of the issues. The timing (coincident with economic turmoil, expectations of a recession, and little more than a month prior to an election) suggests the appearance of cynical motivation by the railroad unions to impose a possible strike.
Judging by the statements of the administration and the railroads (thanks for sharing, Walt), it seems they’ve been talking about this agreement for a while. If true, it’s good. Some things are better done out of the public eye. Looks like a good job by the administration. I hope I’m correct. And I hope there’s no more news about this matter.
The timing was well out of the unions’ hands. They’ve been negotiating for almost 3 years. They haven’t had a contract since before covid.
Labor protection laws written in the 20s and 30s contained special carve-outs for the railroads. As such, even without a contract, the unions had to jump through years worth of hoops before they could legally strike. The fact that the clock ran out 6 weeks before an election & in the midst of economic turmoil is just unfortunate coincidence.
You’re not usually in the habit of giving this administration so much credit. That said, nothing you’ve said is untrue, but I would argue it isn’t the most relevant part of the discussion. This isn’t a matter of what should be “allowed,” it’s a matter of what the actual workers will do. Congress can order them back to work (thus not “allowing” them to strike), but humans have agency and free will, so what they actually do is a different matter.
There is precedent for this: the 1981 air traffic controller strike, which violated federal law. That ended in 48 hours when Reagan fired them all. He was able to get away with that because he could use National Guard/Military controllers. The military does a hell of a lot of air traffic control, and they’re very good at it. Railroading is a different story though, and Biden is a different president. Incidentally, it took 10 years for air traffic control staffing levels to return to normal.
Rail labor has never been as disgruntled as they are today (in our lifetimes anyway), and they have never had more leverage. The only question is how they will choose to use that leverage, nothing more.
My canvassing of socials suggests they will vote in favor of the deal, but it will be close. Furthermore, it’ll take time to actually write out the contract (the tentative agreement is just a framework, not a legal document) and then vote on it, which will give pro-strike supporters time to rally the base.
To summarize, a rail strike at this point would be a black swan, but black swans happen all the time.
(The latter comment was intended as a reply to Heisenberg up above, not to you Dave).
I realize there’s precedent. That’s what I was referring to. You seem passionate about this, which is great. Your comments add (a lot) to the discussion. Keep them coming if you’re so inclined.
The quoted passages (below) are from Zoltan Pozsar’s Aug 1 note, “War and Interest Rates.” I think the excerpts are germane here:
“Consider two developments that helped Chair Volcker’s fight against inflation.
First, between the OPEC price shocks and Paul Volcker’s arrival as Fed chair, major energy companies had poured USD billions into new energy projects – the oil fields of the North Sea as well as the Norwegian Sea were developed, and oil fields were developed in the U.S. as well. All this new supply of oil, combined with the recession of the early 1980s, led to a collapse of oil prices, which was doubtless one key ingredient of Paul Volcker’s phenomenal success.
Second, 1981 was the year when President Reagan fired air traffic controllers that went on a strike, ushering in a period that saw the power of unions weaken: the institutional practice of linking wage increases to the rate of inflation ended, which is probably how Volcker “re-anchored” inflation expectations in practice (no Woodfordian voodoo -magic, just some heavy-handed, political meddling).
Today’s environment couldn’t be more different. First, unlike the 1970s, when oil majors had invested for a decade to pump more, we just ended a decade of little investment in oil fields – a legacy of ESG policies. Yes, the price of crude is falling due to recession fears, but it is not collapsing. Supply in the oil market is tight, and releases from the SPR won’t last forever: whereas in the 1970s we invested in oil, today we’re depleting oil reserves, and it takes many years to develop new fields. The oil market will get tighter during the Fed’s current tightening campaign, not easier like under Volcker: President Biden’s recent visit to Riyadh didn’t yield speedy production increases.
Second, during the 1980s, short -circuiting wage-price pressures was relatively easy, as it only took political will to do it – see President Reagan’s action above and weaker political support for unions.
But today, we have a bigger problem: a shortage of labor, particularly in services, which is due to a mix of factors such as tougher immigration policies to appease nativists; early retirements and other labor market changes driven by the pandemic; and extreme wealth gains sapping labor force participation on the one hand (“feel rich, work less”) and driving demand for services on the other (“feel rich, spend more”). It’s a mess: it’s easier to deal with the politics of wage setting than it is to “grow” people – even in The Matrix, that’s possible only over time. Until then, we are stuck with a labor shortage, and President Biden’s top labor lawyer is the anti-Reagan: she’s encouraging the unionization of workers from Amazon to Starbucks as opposed to firing them.
Maybe it’s because I do not have a PhD degree,but I don’t see why inflation is about to peak. Why can’t it go higher from here?”
Thank you for bringing up Reagan’s handling of the air traffic controller’s strike. His solution to that problem was a watershed moment in labor history. Any doubts about what Biden did or didn’t accomplish should be informed by the reality of the treatment of unions and labor by Republican administrations.
Also, should Warren Buffett reap all the profit from owning BNSF? He had the idea to buy the railroad. Does he produce the profit? This is the question that we are facing right now. It is the question we faced in the 80’s before offshoring of jobs.
In my youth I was a regular train rider. I would ride the New York Central from Chicago to the crew change stop in Elkhart, IN, the site of what was then the biggest automated rail yard in the US. I enjoyed those rides mostly because the filthy coach car would contain mostly me and half a dozen personnel getting paid to go to and/or from Chicago to catch their next 2-hour working ride back. These guys were all pretty good gin players and the time would pass quickly.
A teaching colleague of mine was a real train nut and one day in his intermediate accounting class he was berating his students for not having done their homework. He asked them why they heck they were even majoring in accounting and one told him it was because he wanted to get a “good job.” My friend said accounting is not a good job. He said a good job is being an engineer on a short-line RR. He pointed out that these guys run their train for 2 hours, hop off so someone else can take over and have the rest of the day free. Next day the same guy gets back on and runs the train back home. Then it’s three paid days off followed by two two-hour runs to finish the week. For that the guys get paid 90k. He said, “Now that’s a good job!”
Every class 1 railroad in the US has been bankrupt at lest once and many more often than that. I also rode the Chicago, South Shore and and South Bend RR. It was in continuous bankruptcy for 40+ years. If we didn’t have RRs we wouldn’t enjoy the life we have but these guys have been screwed up for years. It’s been a long time since these unions had this much leverage. It will be interesting to see how this turns out. No one has mentioned the provision of the Taft-Hartly Act that allows the President to stop a strike and force strikers back to work if a strike creates a national emergency. The last use of this action was in the GW Bush Administration to bring longshoremen back to work.
Lucky One – those were “the good old days”. The times the MAGA mob yearn to return to. Of course, they absolutely do NOT want the return of the powerful labor unions which helped make that golden age possible.
All things change: Google “precision railroading.” Good for shareholders for a few years, which is all that matters. But I have to laugh when I see an exec at a railroad whining about how hard it is to find workers. Just maybe if you hadn’t fired (not laid off) a big chunk of your workforce they wouldn’t be facing this issue in the first place.
Since 2020 weve seen how shareholder returns and operational redundancy are not compatible.
I’ve more to say, but now that kid is home from school, I’ll content myself with a news detail to update everyone.
With all 12 unions’ leadership agreeing to tentative agreements, the current cooldown period (which was set to expire tomorrow) has been extended for 30 days. Depending on member votes, the next date to watch out for is October 15th.
One of the most iconic songs of the grunge era early 90’s was a cover.
I don’t know if you can even call it a cover. Can you cover a folk song whose meaning is lost to the fog of history?
I’m talking about Nirvana’s “My Girl” from the Unplugged In New York album, and I think “cover” applies because Nirvana performed a reasonably faithful reproduction of Lead Belly’s recording. Lead Belly actually titled it “In The Pines,” but that’s neither here nor there. The song’s earliest known mention dates to 1870, and it’s thought the song was combined out of two differnt folks songs, one about “the pines,” (presumably a metaphor, but no one can agree on what it’s a metaphor for), and one about The Georgia Line.
The most common element across versions is the decapitation. https://en.wikipedia.org/wiki/Driving_wheel
“You can’t let the country’s rail system shut down in the middle of a supply chain crisis, with inflation at 8.5%.“
Really.
Tell that to a Rail Worker who spends 27 days a month out on the road away from their family. Big Bill Haywood said at the Lawrence strike, “Let them weave cloth with bayonets.” Theres your long term solution to “growing workers”.
In steel mill towns like Gary, my friends from the mill tell me there was a baby boom every strike occurence. When you spend every waking hour on the job, theres no time to even think about scratchin’ your rear.
I hope these guys and gals go out for a week or two, just to take some hard earned time off and show these corporations that they need to respect the humanity of their employees as well as what labor does to keep all of you warm and fed.
This is all about hours of service and time away from home. No amount of money can improve your quality of life when your soul is shackled to a Class I RR…
This battle has yet begun. These carriers are trying to slide 1 person crews into work rules and break the backs of every working person on the lines.
The angels got together and they said it wasnt fair
For Casey Jones to go around scabbin’ everywhere
Angels Local 23, you know that they were there
They promptly fired Casey down the Golden Stair
Casey Jones!
Went to hell a flyin
Casey Jones!
Was workin double time
Casey Jones!
Get busy shovelin sulfur
Thats what you get for scabbin’ on the SP line!