Update 635 — Democrats Dodge a Bullet:
Biden’s Been Working OT on the Railroad
Yesterday, President Biden announced a tentative agreement between major freight rail carriers and unions representing the nation’s freight workers. The announcement came just one day before a strike shutting down the freight rail system. Disruptions to shipments caused by a strike could have had serious inflationary and other far-reaching consequences, hitting just as voters begin casting midterm ballots.
So Democrats have avoided economic derailment— for now. The deal is not yet set in stone. Union members must still vote to ratify the agreement before the proposed contract can go into effect. The outcome remains uncertain and Democratic leaders in Congress may still need to weigh both economic concerns and the rights of workers.
In today’s update we cover freight worker negotiations, economic impacts, and the political situation at hand.
Good weekends all,
Dana
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Long-Term No Contract
The country’s freight workers have been working without a contract since 2019. In July, President Biden convened a Presidential Emergency Board, which offered up its recommendations for a compromise contract in August. The PEB’s recommendations included a 24 percent wage increase by 2024 but did not address workers’ concerns about unfair and unsafe working conditions. Around 78 percent of union members surveyed in August were ready to reject the PEB deal.
The breaking point of negotiations has not been salary increases or bonuses but rather the rail carriers’ draconian attendance and scheduling policies. Workers can sometimes be on call for 14 days in a row and are penalized for taking unpaid time off, even to go to the doctor. As a result, rail workers have come to work sick and tired, posing both personal risk to the employee and a general public safety risk. These policies diminish workers’ quality of life, disabling them from getting adequate free time. Union officials say that BNSF’s new Hi-Viz attendance policy has led over 700 employees to quit since February, an indication of how unsustainable these policies are.
The two largest rail unions which make up roughly half of the nation’s rail workers, the Brotherhood of Locomotive Engineers and Trainmen and the International Association of Sheet Metal Air, Rail, and Transportation Workers refused the PEB agreement, opening the door for a strike as soon as today, when the 30-day cooling off period expired.
President Biden and Labor Secretary Marty Walsh worked tirelessly this week to bring both parties to a tentative agreement and avert a strike. Late Wednesday night, after 20 continuous hours of talks, the carriers and the unions reached a tentative agreement. Beyond the 24 percent wage increase by 2024 and $1,000 annual bonuses, workers will also receive one day of paid sick leave – far short of the 15 they requested – and will be able to take unpaid leave to receive routine medical care.
In a statement Thursday morning, President Biden claimed victory for the American people, the rail workers and rail companies. However, celebration may be premature: There are no guarantees until the unions’ members vote to ratify the agreement next week. Many members have already expressed displeasure with the tentative agreement. The broad view within the movement is that conditions for labor are unusually favorable at this moment, and members may choose to reject a sub-par deal knowing that this may be their last chance to secure a better one for a long while. If the agreement is not ratified, the country could find itself facing a potential strike again within a few weeks.
Paid Sick Days and Leave in 22 Countries, Worker at Half the Median Earnings
Source: CEPR
Economic Impact Avoided
Late Wednesday night, U.S. passenger railroad Amtrak announced its suspension of all long-distance trains in anticipation of a strike commencing early this morning. This announcement came in tandem with the shutdown of several state-supported routes, although Amtrak was quick to ensure most regional northeast routes would remain unaffected. Though Amtrak workers themselves were not directly involved in the widespread labor dispute, Amtrak runs predominantly on freight-owned and operated tracks, leaving little to no room for discussion.
U.S. railways account for 28 percent of the nation’s freight activity and are a critical component to the US economy, and any type of disruption in operations – especially one that lasted longer than a day or two – would have detrimental impacts on an already bruised economy. Not only would a strike create challenges for commuters, businesses and households, but it would feed further into inflationary fire and grow hotter with each day that passes.
Ton-Miles of US Shipments by Mode of Transport
Source: Department of Transportation
In addition to suspended rail services, 5,300 carloads of raw plastics, ammonia, fertilizer and other hazardous materials have been put on hold due to their chemical makeup. Not only will farmers suffer the loss of fertilizer, but a strike would have coincided with the annual peak of fall harvest. A potential freight shutdown has the ability to halt an estimated 6,300 railcars of food and farm products. Lack of resources and the inability to ship and sell crops has the potential to erase all progress made by farmers who have struggled to recover since the pandemic.
The potential for failed negotiations has put a particularly large strain on an already fragile supply chain, and the potential for prices to revert back to record-highs only exacerbates the matter. The cost of gas has steadily decreased for three consecutive months, following a period of record-high pump prices, but the looming possibility of a strike has the power to send gas prices soaring.
All of these factors paired with the lack of consensus and resolution seen between Washington and industry groups has prompted concern throughout much of the nation, so much so that industry experts put the costs of a total shutdown at about $2 billion per day. However, it is important to note that no strike would be allowed to continue for more than a day or two.
Labor-Management-Congress Relations
This dispute has highlighted the unusual nature of railway labor negotiations. The Railway Labor Act, first enacted in 1926, outlines an elaborate procedure for the resolution of labor disputes in the industry. When that process has completed, as it did this morning, either side is able to stage either a strike or a lockout in accordance with its own interests. Congress has on occasion stepped in to force an agreement and send striking rail workers back to work in order to avoid the economic disaster of a protracted rail strike, most recently in 1992, when President Bush signed a bill ending the strike after less than 24 hours.
Today’s political situation is unique in two ways: Supply chains have already been strained for over two years thanks to the pandemic and the Russian invasion of Ukraine, and one of the most pro-labor presidents in history occupies the White House. President Biden, who has spent much of his term beleaguered by rising gas prices and inflation, has only recently been able to start turning around public perception that he is mishandling the economy as gas prices have come back down. A new snag in the supply chain could have spelled disaster for Democrats in the midterms less than two short months away.
On the other hand, labor, which has long been a core element of the Democratic base, has become an increasingly important part of the party’s agenda since 2020. Democrats turning their backs on the unions, who asked Congress to stay out of the dispute, would have had political consequences of its own. Some in Congress were ready to ignore the unions’ requests. Senator Bernie Sanders objected Wednesday night to an attempt by Senator Richard Burr to get unanimous consent for a joint resolution requiring the negotiating parties to accept the recommendations of the PEB. Had Congress moved the joint resolution, it would have kept tens of thousands of workers from bargaining further. Current conditions and attendance policies would be bad for workers, risking almost certain mass quits in an industry already struggling to recruit and retain employees.
The Biden administration should be commended for its long-term and recently overtime efforts to bring the parties to a mutually acceptable deal without a strike or Congressional intervention. Assuming the tentative agreement is ratified by the unions, the administration will be able to claim the success of avoiding a strike while also securing a deal somewhat more favorable to workers than the board’s recommendations.
Labor Secretary Walsh said after a 22-hour work day this week: “It’s like holy Christ: the magnitude of what would have happened. We’ll never fully understand, thank God.”