AAR: Rail strike could cost $2B a day

The Association of American Railroads estimates a freight-rail strike would cost the economy more than $2 billion a day, according to a report issued yesterday in an effort to pressure seven unions to agree to a new labor contract with the nation's rail carriers.

The AAR issued the report yesterday, and said if negotiations remain unsettled with the remaining unions by Sept. 16, Congress must act to prevent a rail service interruption. Sept. 16 is the date that a 30-day "cooling-off" period between the railroads and labor unions under the Railway Labor Act expires.

"Failure to act could idle more than 7,000 trains daily and trigger retail product shortages, widespread manufacturing shutdowns, job losses and disruptions to hundreds of thousands of passenger-rail customers," AAR officials said in a press release.

The cooling-off period followed the Presidential Emergency Board's recommendations for a contract settlement. To date, five unions — representing 21,000 of the nation’s 115,000 unionized workers — have agreed to accept those recommendations. Seven have yet to accept the recommended terms.

"President Biden’s PEB-recommended terms that would maintain the highest quality health-care coverage and result in compounded wage increases of 24%, bonuses totaling $5,000 — the highest pay increases in nearly 50 years," said AAR President and CEO Ian Jefferies.

The AAR report updates a 1992 Federal Railroad Administration econometric study to quantify the potential impacts of a national rail shutdown on employment and economic output in today’s dollars. Additionally, the report outlines how the lost economic output would harm manufacturers, distributors, retailers and consumers.

The Railway Labor Act governs the bargaining process between the rail industry and its 115,000 unionized employees, encouraging parties to settle disputes without disruption to national rail service. Ultimately, Congress has the power to intercede and avert a shutdown.

The AAR’s report can be read here.

Officials representing the unions that have yet to agree to terms have said they are holding out with the hope that the railroads will agree to address their concerns about working conditions.

Meanwhile, shippers are concerned about the impact a rail shutdown would have on the economy. Yesterday, The Fertilizer Institute, representing the fertilizer industry, sent a letter to congressional leadership urging action to prevent a rail-service shutdown.

"A disruption to freight-rail operations would be catastrophic,” said TFI President and CEO Corey Rosenbusch in a press release. “Over half of all fertilizer moves by rail year-round throughout the United States and the timeliness and reliability of fertilizer shipments is absolutely critical. If farmers do not receive fertilizer, it results in lower crop yields, higher food prices and more inflation for consumers."