During his 18 years at Union Pacific Railroad, Jason Doering has seen a lot. However, what is happening with the current UP hiring class is unparalleled. “They’re dropping like flies,” observed Doering. “I mean, I’ve never seen anything like it.”
A railroad engineer or conductor often earns a six-figure income, has a pension, and is covered by union benefits. They don’t require a college degree because they receive months of on-the-job training. It’s the kind of job that should be appealing, but Doering says both newcomers and veterans are getting burned out. It used to be an eight- or nine-hour shift work with lots of leisure at home. Doering now claims that railroading requires too much time away from family and workdays that can last up to 19 hours, combining 12-hour shifts with hours of waiting for transit or relieving personnel.
Union Pacific is having difficulty finding railroad crews after years of reducing headcounts. According to its most recent earnings report, the $22 billion railroaders employed 30,100 people in the first three months of 2022. Five years ago, the corporation employed approximately 12,000 more people. (A Union Pacific spokesman declined to comment for this piece since the company will announce its second-quarter earnings later this month.) The representative did, however, post a company blog about the necessity of supply chain fluidity and cooperation.)
This is not a problem exclusive to Union Pacific. America’s railways are in an unusual state of disarray, with Class I lines unable to hire workers. This has resulted in congestion that researchers claim is worse than in 2021 when rail traffic was at an all-time high. A strike of 115,000 rail workers is now possible as early as next week.
“We’re spending more time at home-away terminals than at home,” Doering explained. Doering also serves as the Nevada legislative director for the SMART Transportation Division, a labor union representing train, airline, and other transportation workers. “I believe the attitudes out here are justified.” Morale has reached an all-time low.”
Train headcounts are unusual right now, according to Tony Hatch, a long-time rail researcher. Crews and carloads typically move in lockstep, with railroaders able to hire up or down as traffic increases or decreases. Those companies are now unable to keep up. Carloads have been gradually increasing since mid-2020, but employment has not kept pace.
“There was a significant, historical rupture in the tandem link between train workers and tonnage,” Hatch explained.
Outside, stalled behind a miles-long behemoth, one does not typically consider the significance of the small train. It isn’t as common as a vehicle, as fast as a cargo jet, or as cosmopolitan as a container ship. It may even appear archaic. Indeed, railcar cargoes aren’t typically consumer products – think gravel, grain, coal, and chemicals. These are critical components of our overall economy. Gravel is used to building our homes and roads, grain is used to grow our food (and our food’s food), coal is used to generate energy, and chemicals are used to make many everyday things.
While you may not have been keeping up with rail congestion, industrial titans and legislators alike are enraged. Rail has been blamed by the coal industry for a “meltdown” in a service capacity, while grain shippers have alleged they have had to spend $100 million more in transportation costs to get their product transported due to inadequate rail service. The Port of Los Angeles has taken to the press to demand that the gosh dang containers be moved, claiming that the undisturbed containers could cause a “nationwide logjam.” Surface Transportation Board members recently requested answers from railroad executives during a two-day meeting in May, but tensions appeared to have worsened since then.
The railway workers are much wearier. Rail unions and their companies have been negotiating since January 2020, with a “dead stop” in negotiations announced two years later. President Joe Biden is now tasked with forming a “Presidential Emergency Board” to negotiate a new contract. If he does not do so by Monday, railroad workers will be able to legitimately strike for the first time since 1992. According to the US Chamber of Commerce, such a strike would be “disastrous.”
In May, STB Chairman Marty Oberman told the House Transportation Committee, “They’ve really slashed labor below the bone.” “To compensate for the labor shortfall, they are overworking and exploiting the workforces they have.”
Meanwhile, in a May statement, the Association of American Railroads stated that the rail firms it represents were dedicated to recruiting additional people and addressing train service difficulties.
“The rail sector recognizes its essential role in serving the United States economy and is confident in its ability to work alongside customers to address service challenges moving forward,” AAR President and CEO Ian Jefferies said in a statement.
It’s a crazy scenario, and the origins trace back before COVID. This is what happened:
Two clever railroad techniques that shippers despise!
Let me tell you about the 2010s’ trendiest rail trend: precision-scheduled railroading. PSR, as defined by The Wall Street Journal’s Paul Ziobro in a 2019 report, indicates that railroads, like commercial airlines, have predetermined periods for picking up cargo from their clients. Previously, railroads would wait for shipments.
This approach has numerous consequences, some of which my colleague Mike Baudendistel explored in this 2020 post. PSR enabled railroads to cut capital budgets, reduce manpower, and integrate internal processes with glee. But the biggest benefit to railroads was how much it improved their reputation on Wall Street, generating billions in shareholder value.
“Railroad equities have considerably outperformed the broader market in the last 15 years, despite a significant decline in coal volume, the railroads’ historical business,” Baudendistel noted.
PSR, on the other hand, has major service concerns. According to another 2019 WSJ report by Ziobro, when the approach was first applied at CSX Transportation, dwell time at some terminals increased by up to 26 hours. Trips that should have taken a few days turned into more than two weeks, causing problems for customers who relied on just-in-time supply chains.
We could talk about PSR all day, but I’m bringing it up today since the technique allowed railroads to drastically reduce headcounts.
According to Todd Tranausky, vice president of rail and intermodal at forecasting firm FTR Transportation Intelligence, the legacy of PSR has contributed to low personnel numbers at railroads today.
Another trend identified by Union Pacific’s Doering is super-long freight trains. This is such a serious issue that the federal government issued a report on it in 2019, claiming that the trains had grown so large that pedestrians were climbing over them and emergency personnel was unable to attend to emergencies. Long freight trains, on the other hand, allowed railroads to extract more profit from their equipment and people, allowing them to achieve economies of scale.
Readers of MODES will be familiar with my opinions against overly huge pieces of freight transit. The mega-trains, on the other hand, irritate railroad conductors and engineers. One explanation is that they are simply slow, extending workdays and weighing down morale. “It gets on you when you’re traveling up a 20-mile climb at 9 or 10 miles per hour in the middle of the night,” Doering said.
Another argument is that it takes longer to repair them if a car or locomotive breaks down. Walking along kilometers of railcars, inspecting for cracked knuckles or jammed brakes, is not my idea of fun.
“Part of the lifestyle issue [in hiring],” Tranausky explained. “How many people want to travel a mile or two miles to locate an issue, correct that issue, and then go back down the road when it’s 105 degrees outside or there’s a foot of snow?” There’s the lifestyle issue, which is aggravated by the length of the ride.”
COVID decimated even more railroad payrolls.
Rail behemoths, as one might expect, struggled in the early months of COVID. Rail carloads, for example, fell by the most since 1989 April 2020, while intermodal loadings fell by the most since 2009.
Railroads laid-off workers from April to July 2020, when my colleague Joanna Marsh reported that crew numbers had finally begun to rise again. Despite this, there were 25% fewer crews than in 2019 and 28% fewer than in 2018, according to Surface Transportation Board data.
These companies’ financial standing was in jeopardy, which prompted them to lay off people. “At least one Class I railroad had meetings to determine whether they had enough cash to get through the summer, whether they had enough cash to pay the bills, and whether they could stay in business,” Hatch added. “When they started laying people off, much to the chagrin of regulators and such today, you had to appreciate that they had no idea how long this would endure.”
Railroaders struggled to re-hire crews who had been furloughed. Many of them found work in construction or manufacturing, which allow them to spend evenings and weekends at home, according to Tranausky.
Unlike its trucking and ocean freight counterparts, the railroad industry did not have a crazy 2021 — but it survived. Volumes in 2021 were higher than the previous year. They were still lower than in 2019.
Even as volumes decline, railroad service suffers.
Shippers’, officials’, and lawmakers’ service complaints have been increasingly vocal in 2022. And data from rail providers reveal that service has degraded – train speeds have reduced significantly since 2021, while terminal dwell time has increased. But there’s an interesting twist: rail volume has actually fallen during that same time span, according to Susquehanna International Group data.
Average train speed and terminal dwell time come from each company’s 2022 first-quarter earnings reports. Traffic comes from Susquehanna International Group. BNSF, a wholly-owned subsidiary of Berkshire Hathaway, does not disclose train speed or dwell time and was not included in this comparison.
These railroads laid off far too many people as a result of PSR implementation and the epidemic. According to the Bureau of Labor Statistics, rail employment has decreased by more than 20% since the beginning of 2019 — a “dramatic reduction,” according to Tranausky.
“It’s likely that the railways furloughed too many people and could have incurred additional costs,” Hatch said. “I believe one lesson from this is that railroads will have more safety stock [of labor] in the so-called just-in-case economy of the future.”
PSR aided railroaders in increasing profits and share prices, but its legacies may be contributing to today’s problems.
Berkshire Hathaway’s BNSF takes an unusually unpopular approach to staffing. BNSF began penalizing employees who took time off for weariness, family situations, or illness in February. According to union authorities, 700 rail workers were laid off as a result of the program. In June, the $23.3 billion railroaders canceled the policy.
Some concerns are entirely beyond the railroads’ control. Most types of firms in the country are still having difficulty finding labor. According to Doering’s views, even obtaining shuttle drivers to take train personnel to their destination has been difficult. Union Pacific recently put him in a taxi from Las Vegas to inland California. Doering explained, “We’re watching the tiny ticker up there in the cab go up to $400 or $500 for a ride.”
Even in the best of circumstances, it’s difficult to find someone to join a railroad crew. They live a lifestyle comparable to that of airline pilots, who must be away from their families for days at a time, living in hotels and operating enormous, possibly deadly pieces of equipment. Railroad personnel is on call even while they are at home.
They need months of training and then years or decades on the job to become true rail masters. “There will be a learning curve,” Tranausky explained. “[New crews] are not as efficient or productive as higher-ranking workers.”
While Tranausky and Hatch stated that labor is the primary cause of today’s congestion, one issue is completely beyond railroad control. Unlike in 2021, many warehouses are fully stocked. According to some sources, shippers are essentially using railcars as storage rather than putting the freight into their own facility. This is producing a chassis scarcity and increasing congestion, particularly in rail yards like Chicago.
“I believe it’s simple to point fingers and say the railroad is causing the problem,” said Ashley Rittman, CEO of Valor Victoria, a railroad technology business. “I believe the railroad is frequently in a position (where) they must be reactive to what environmental phenomena happen to them, for them.” If chassis is too short or customers are resting on containers, their equipment is truly held prisoner from rotating if everyone isn’t working together.”
… yet things might swiftly deteriorate.
Rail workers are subject to a host of complicated labor standards that determine when they can legitimately strike. Crews and their employers are currently subject to a 30-day “cooling-off” period. This expires on Monday, after which crews may legitimately strike. President Biden is set to form a Presidential Emergency Board to address the strike.
Railroad labor negotiators told the Financial Times on Thursday that they promised workers a significant wage boost and “benefits among the best in the nation.” According to a union negotiator, these offers were “insulting.”
The tensions couldn’t have come at a worse moment for the so-called “pro-union” president, who is also promising to assist in resolving tensions at the ports of Los Angeles and Long Beach. There, the union contract for over 22,000 workers had recently ended. The recent Supreme Court decision not to hear a challenge challenging AB5, a bill that would abolish the owner-operator model of trucking in the state of California, has added to the confusion at America’s largest port complex. On Wednesday, hundreds of truck drivers demonstrated against AB5.
There hasn’t been a rail strike in the United States since 1992 when CSX Transportation machinists went on strike. Their strike effectively shut down all American rail operations, including passenger service, which runs on some freight trains. The White House claimed at the time that the shutdown was costing Americans $1 billion per day, or more than $2 billion in today’s money.
Even though the 1992 strike was just two days long, it was extremely disruptive. The Chamber of Commerce is concerned that a work stoppage this time will be as crippling. “Any collapse would be terrible for US consumers and the economy, perhaps returning us to the historic supply chain issues during the pandemic’s depths,” wrote Suzanne P. Clark, CEO, and president of the Chamber of Commerce, in a July 8 letter to the administration.
Meanwhile, Doering thinks that even a strong contract will not be enough to boost morale among his fellow railroad workers.
“Everyone goes to work, and there’s nothing positive to say,” Doering explained. “There is nothing positive happening in the industry. You must pick between your profession and your personal life.”
