Industry News

Mayhem at the Rails: Labor Shortage Hitting a Turning Point as Workers Lose Patience

Let’s begin with a few facts:

  • Rail carries the most freight by ton-miles. Rail accounts for 39.5% of U.S. freight by ton-miles, compared to trucks, which account for only 29% of ton-miles. 
  • Although Europe beats out the U.S. in the volume of passenger rail travel, U.S. freight railroads far outpace that of the European Union by 154%.
  • While trucks carry most goods shipped less than 750 miles, rail is the leading form of transportation for shipments traveling 750 to 2,000 miles.
  • Rail freight tonnage is expected to grow 22% between 2010 and 2035.

Source: U.S. Department of Transportation, Association of American Railroads, and the Transportation Research Forum

Looking closely at the last point about rail freight tonnage growing each year. This is concerning seeing as though over the past six years major railroads have cut their combined workforce by 29% or 45,000 employees. It’s safe to say that this decrease in personnel isn’t due to breakthrough technology or automation. So, what’s going on? 

According to the Surface Transportation Board, the cut in the workforce is attributed to streamlining operations and “precision scheduled railroading” (PSR). The goal of PSR is to overhaul current rail networks to run fewer trains, with tighter schedules, and with fewer employees. 

“…railroads are running longer trains with fewer workers. That has reduced costs as a percentage of revenue, boosted profits, and driven shares to mostly beat the stock market over the past decade. [Warren] Buffett has described precision railroading as forcing customers to adapt to railroads, rather than the other way around.”

While PSR has reflected profitably for railroad companies it has also brought to light less than favorable outcomes. For instance, due to the increase in demand for consumer goods, a lighter workforce has caused higher dwell times. Also, with fewer runs, shipments in bulk have become more common, which businesses may or may not be able to accommodate receiving. 

On top of all of this, and perhaps most importantly, is an exhausted labor force. On July 15, railroads just barely dodged their first major strike in three decades due to President Biden’s appointment of an emergency board to oversee labor talks. An article from the Wall Street Journal indicates that “resentment on the railroad has been building since before the pandemic, as workers say increased job uncertainty and deteriorating work conditions have made these positions less desirable despite the relatively high pay.”

Unfortunately, working on the rail isn’t a glamorous job making recruitment a difficult task. On top of that, while the pay is decent, the hours can be grueling. Many veteran railroad workers cite the fact that most new hires will leave weeks after starting.

This is clearly a predicament that railroad companies need to solve. Similar issues can be seen in other parts of the supply chain from trucking to the ports, both of which have seen numerous labor threats over the past couple of years. Losing any part of the supply chain workforce due to a strike could be severely damaging to the supply chain. Needless to say, the clock is ticking to strengthen the labor force on the rails and freight rail companies need to figure out a way to keep things on ‘track’.