MONEY

Looming railroad strike could be 'economic disaster,' impacting consumers from all angles

Katie Wedell
USA TODAY

A national railroad strike could begin Friday if additional agreements are not reached, which industry experts warn would shut down 30% of the country’s freight and halt many passenger and commuter trains. 

Several of the labor unions representing railroad workers in an ongoing contract dispute reached tentative agreements over the weekend, but two of the largest are still holding out for more quality-of-life provisions in their contracts. 

Here's how a railroad strike could impact you.

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Your commute or travel

That's because freight railroads own and maintain nearly 97% of the tracks on Amtrak’s system, and half of commuter rail systems operate at least partially on tracks or rights of way owned by freight railroads, according to the Association of American Railroads.

"A shutdown would also disrupt hundreds of thousands of commuter daily rail trips across the country," the industry group said. 

When could a strike start?

If the two sides can’t agree on a deal by the end of the week, Congress is expected to step in to block a strike because of the dire economic consequences.

Rob Benedict, a vice president with the American Fuel and Petrochemical Manufacturers group that represents refineries and other chemical companies, previously told the Associated Press, “We want to avoid (a strike) at all costs, especially when we are in a precarious situation like our nation is now in kind of our current supply chain crisis.”

Goods could take longer to get to you 

According to the Association of American Railroads, "a single container or trailer on a railcar can contain 2,000 UPS packages, tens of thousands of bananas or hundreds of flat-screen televisions." 

The trade group said roughly 467,000 additional trucks a day would be needed to handle all the cargo trains haul, and there is already a shortage of truck drivers.

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How did we get here?

As of Sunday, 10 of the 12 unions that together represent 125,000 workers had reached tentative agreements based on recommendations from an emergency board appointed by President Joe Biden in July.

The unions are negotiating with the National Carriers Conference Committee, which represents the major railroad companies Union Pacific, BNSF, CSX, Norfolk Southern and Kansas City Southern.

U.S. Chamber of Commerce President and CEO Suzanne P. Clark on Monday said a strike would have “catastrophic economic impacts.”

She called for urgent action to resolve the standoff.

“A national rail strike would be an economic disaster – freezing the flow of goods, emptying shelves, shuttering workplaces, and raising prices for families and businesses alike," she said in a statement. 

Those tentative agreements will deliver 24% raises and $5,000 in bonuses over a five-year contract that’s retroactive to 2020. Before that, the most recent round of bargaining between the 12 unions and railroad ownership went from 2014 to 2018, according to the National Railway Labor Conference.  

But the two holdouts are the biggest of the rail labor unions, the Brotherhood of Locomotive Engineers and Trainmen and the International Association of Sheet Metal Air, Rail and Transportation Workers. 

They account for more than 60,000 rail employees, about half the workforce. 

Approximately 40% of the nation’s long-distance trade moves by rails, and industry trade groups estimate the loss in economic output of idling 7,000 trains daily would likely be at least $2 billion per day.  

That would include retail product shortages on shelves immediately, and delays in manufacturing down the road when plants can't get the plastics, chemicals and other supplies they need. 

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The two remaining unions issued a statement over the weekend criticizing the railroads' move to begin delaying some shipments ahead of this week’s looming strike deadline.

They said it is an attempt to get shippers to increase the pressure on Congress to intervene and block a work stoppage by imposing a contract on workers.

The unions said they want to address concerns about strict attendance policies that they say make it hard to take any time off, and increasing workloads after the railroads cut nearly one-third of their workforce in recent years.

Workers building a new railway.

Food shortages and big impacts on farmers as the fall harvest approaches

According to the U.S. Department of Agriculture, railroads account for more than 20% of grain shipments. 

Each year, railroads haul around 1.6 million carloads and intermodal units of wheat, corn, soybeans and other agricultural products, plus another 1.5 million units of animal feed, beer, birdseed, canned produce, corn syrup, flour, french fries, frozen chickens, sugar, wine and countless other food products.

Rail is especially critical during fall harvests. An interruption in rail service during harvests would quickly result in exhausting local grain storage capacity, according to the AAR.

Railroads also move approximately one-third of U.S. grain exports to the ports.

"A rail shutdown would put these export movements – which are even more important now given the Ukraine conflict – at risk," the AAR said.

Manufacturers may have to slow production or shut down

Key ingredients for making consumer products, auto parts and more are shipped via rail. 

"A single loaded railcar of polyethylene terephthalate (a type of plastic) is enough to make around two million two-liter soda bottles," according to the AAR. "Soda ash, another chemical, is used in various manufacturing processes, with glass manufacturing the most important. One rail carload contains enough soda ash to make 8,400 auto windshields."

Home construction could slow further

In July, the average time to build a new home was up to eight months or longer, compared with about four to 6½ months before the pandemic, according to the National Association of Home Builders. 

A lack of lumber and other supplies is one reason for these delays, and the one most likely to be affected by a major rail strike. 

Many of the wood and paper products consumed in the United States are shipped by rail from Canada. In a typical year, U.S. Class I railroads haul an average of about 430,000 carloads of lumber and wood products, according to the AAR. 

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An even longer wait for new cars

Anyone who has tried to buy a car lately knows the inventory at dealerships is low. You may have to wait weeks or months if you want a specific color or options package. 

The AAR says 75% of all newly finished cars begin their journey to the dealership on a train.

Energy production could be impacted 

Coal accounts for more than 20% of America’s electricity, and railroads haul 70% of that coal, according to the AAR. 

The Edison Electric Institute, a trade association for the electric utility industry, wrote the White House saying, “U.S. freight rail is critical to … our sector, and a network shutdown of any length would have far-reaching effects."

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