After a series of three votes in the Senate, the federal government on Thursday averted a national strike and imposed an agreement originally brokered in September by the Biden administration for America’s railroad workers.
Daniel Stanton, author of the book, "Supply Chain Management for Dummies," said it’s not unusual for the federal government to intervene in railroad labor negotiations.
“This actually goes back to the late 1800s,” said Stanton, who teaches at Bradley University. “There were rail strikes across the U.S. in which they sent out militias, and the National Guard and the federal government put down strikes.”
In 1926, Congress passed the Railway Labor Act, a joint effort of rail labor and management, that allows the government to force a contract in disputes and avoid the cascading supply chain consequences of a railroad strike. Stanton said many Americans don’t realize how crucial railroads are to the supply chain.
“Railroads account for about 30% of all the freight that is moved in the country,” he said. “And so you know, it tends to be big stuff.”
Big stuff includes agricultural products and mined materials like coal. Trains are useful for these materials because, as Stanton points out, one train can hold as much as four times what a semi truck can. He said trains also play an important role in importing and exporting U.S. goods.
“The thing that's important about it is, rail tends to play a really important role further up the supply chain,” said Stanton. “Less so as we get close to consumers, where freight typically gets moved by truck or last-mile delivery by vans.”
Because of this, Stanton said the symptoms of a railroad strike would have started with shipping and distributing companies. Products sit and wait, creating backlogs and profit losses. Some of the products would be vital and need to be transported anyway, so they would use trucks instead of trains.
“And like we said a little bit ago, you know, it'll take four trucks to move what would have been on one train car,” said Stanton. “And so that can have a big impact on the trucking market, creating capacity shortages, they're pushing prices up.”
While consumers may not feel the pain of such a disruption right away, Stanton said a ripple effect eventually would emerge months or weeks later when shipped products are delayed, or simply never show up.
“We'll do lots of things to try and keep a factory running and keep the supply chain moving. All of those things add costs, right?” he said. “And when that adds up, when those stack up, well that contributes to the problem of inflation that we're all trying so hard to fight right now.”
It's difficult to pinpoint exactly how the rail strike would have impacted inflation, Stanton said, but because supply chain issues are often cause-and-effect relationships, it’s easier to trace back to the causes than predict effects. Supply chain issues also tend to have lengthy consequences. As an example, Stanton cited the congestion of ships at Los Angeles and Long Beach ports that started in October 2020.
“That queue was finally worked down two weeks ago,” said Stanton. “It's taken us a year and a half to get that part of the supply chain working again, because of this disruption that occurred there.”
He said a supply chain disruption to railroads could take a similar amount of time to resolve.
“A lot of the stuff that we eat, and the components that go into the things that we buy, had to move by a train at some point in its life, if not at many points,” said Stanton. “And creating a disruption there really could lead to these backlogs and these surges that can take, you know, months or in some cases, years, to finally work their way through the system.”
Stanton is an adjunct professor at Bradley University and teaches a class all about supply chain management. His students have been having discussions for weeks about the possible consequences of a railroad strike, he said, and some of the issues at the center of the contract dispute. One of those issues is sick days for railroad workers.
“It's clear why the workers would want to have sick time,” Stanton said. “The issue for the railroads is that in order to schedule trains, literally to make the trains run on time, you need to have workers there when the trains are supposed to run. And for somebody to be able to take a sick day really messes up scheduling.”
Stanton said the desire for sick days intensified following the pandemic, as Americans want the option to take time to care for themselves or ill family members. Simultaneously, he said, railroads are having difficulty finding and retaining new employees, while also competing with the flexibility and speed of trucking.
The September contract passed by the Senate does not include any paid sick days. The Biden administration said it does plan on continuing to advocate for paid sick days for railroad employees outside of the contract negotiations.
