Rail labor talks await logic, reality

Nineteenth century economist Thomas Malthus is associated with a failure to recognize improved productivity as a tide lifting humankind’s standard of living.

Augmented by technological advancement, productivity converts inputs into useful outputs to increase dramatically the quantity, quality, variety and affordability of what we consume.

As steam engines transformed manufacturing, the assembly line churned out affordable automobiles, farm mechanization delivered more food at lower prices, and brains replaced brawn in the workplace, technological advancement permits railroads to do more with less and provide rail workers with higher wages and benefits than most in society.

Indeed, rail employee wages and healthcare benefits rank in the top 7% of industries nationwide, and surged 50% faster than the rate of inflation over the past decade.

The rail employee share of healthcare insurance premiums is less than half that paid by other private-sector workers, and unlike other plans, the employee share of premiums does not rise as family size increases. Co-pays and deductibles are well below those paid by federal government employees and others in the private sector.

In defense of such compensation, railroads are a never-closed, largely unsupervised physical plant stretching nationwide and necessitating a stable work force, with many rail workers having to complete periodic specialized training, master complex safety rules and federal regulations, accept extreme weather conditions, spend long hours away from home, and demonstrate a personal commitment to work efficiently and safely as part of a team.

But as a family must live within its income—or else, the payroll of every business is constrained by profitability, which depends appreciably on improved productivity. And herein is the challenge facing labor and management in the current round of national collective bargaining now in its third year under provisions of the Railway Labor Act.

The economic environment for railroads is changing, with the froth and bubble of rail earnings ebbing. If employee compensation is even to match future estimates of inflation, worker productivity must continue improving. Examples include expanding the use of remote control locomotives, lowering artificial barriers defining yard and road assignments, and allowing one-person crews where implementation of Positive Train Control is proven safe.

Absent productivity boosts, the status quo is unsustainable. Coal revenue, long crucial for paying the bills, is down more than $7 billion, or 44%, since 2011. U.S. coal-fired electricity generation fell from 50% to 30% since 2005 as power companies shifted to natural gas, solar power and wind farms. In coal-rich West Virginia, where coal production tumbled from 132 million tons annually to 88 million since 2012, Appalachian Power Co. is switching to natural gas and renewable energy. U.S. coal exports have declined steadily and sharply since 2012.

Another significant driver of rail profitability is intermodal—but, reports financial journalist Fred Frailey, BNSF and Union Pacific plateaued in 2005, CSX and Norfolk Southern in 2013, and “the international container boom has about played itself out.”

Competition from long-distance truckers remains brutal. Morgan Stanley transportation analyst Ravi Shanker predicts technological improvement and lower energy prices will continue to reduce motor carrier operating costs. Looming are self-driving trucks—‘a matter of “when,” rather than “if.”

Railroads, says consultancy Oliver Wyman, must focus on cost, and that means a greater emphasis on doing more with less.

Whether we like it is as irrelevant as one not liking gravity or aging. The late rail labor executive Dan Johnson perennially emphasized that to remain “among the world’s highest paid and best benefited workforce requires that both sides understand the needs of the other and explore a range of tradeoffs.”

A staunch labor friend, former Rep. Jim Florio (D-N.J.), recently counseled rail labor to explore “the consequences of resistance.” With Republican control of the Executive and Legislative branches, and shortly the first Republican majority at the National Mediation Board since early 2009, such is an imperative, as a bargaining impasse will allow predictably anti-labor outside parties to decide the issues.

As reality knocks on the door and logic rings the bell, who will open the door and let them in?