Railway Companies Aren't Simply Being Stingy: Denying Sick Days is Central to their Business Model
Congress has long recognized the social costs of railway-labor disputes. In 1926, the federal government gave itself broad powers to impose labor settlements on the rail industry. In September, the Biden administration utilized such power to broker a tentative agreement between the leaders of a dozen unions and the railroads. Under that bargain, the companies agreed to a 24 percent pay increase by 2024, annual $1,000 bonuses, and a freeze on health-care costs. On the key point of leave, however, the railroads conceded only a single paid personal day, plus the removal of some disciplinary penalties for time missed as a result of a medical emergency.
When the deal was put to a vote before all members, four of the 12 unions declined to ratify the compromise. With multiple unions voting down the agreement — and others promising solidarity if their peers decide to walk off the job — the threat of an impending rail shutdown once again hangs over the U.S. economy.
....
All of which invites the question: Why do these rail barons hate paid leave so much? Why would a company have no problem handing out 24 percent raises, $1,000 bonuses, and caps on health-care premiums but draw the line on providing a benefit as standard and ubiquitous throughout modern industry as paid sick days?
The answer, in short, is “P.S.R.” — or precision-scheduled railroading.
P.S.R. is an operational strategy that aims to minimize the ratio between railroads’ operating costs and their revenues through various cost-cutting and (ostensibly) efficiency-increasing measures. The basic idea is to transport more freight using fewer workers and railcars.
One way to do this is to make trains longer: A single 100-car train requires less track space than two 50-car ones since you need to maintain some distance between the latter. More critically, one very long train requires fewer crew members to run than two medium ones.
Another way to get more with less is to streamline scheduling so that trains are running at full capacity as often as possible.
All this has worked out poorly for rail workers writ large. Over the past six years, America’s major freight carriers have shed 30 percent of their employees. To compensate for this lost staffing, remaining workers must tolerate irregular schedules and little time off since the railroads don’t have much spare labor capacity left.
Of course, the railroads are in the business of moving freight, not creating jobs. In theory, if these firms could cut labor costs without degrading service, the broader economy could benefit. The railroads could pass on their savings to shippers in the form of lower rates, thereby putting downward pressure on a wide range of consumer prices. Furthermore, the more cost-competitive freight rail becomes relative to trucking, the lower the American economy’s carbon emissions will be.
Thus, according to the rail barons’ boosters, P.S.R. represents an innovation that is good for shippers, consumers, and the planet but bad for America’s least productive rail workers. The rail unions’ opposition to P.S.R. is therefore, in this account, myopically self-interested and contrary to the greater good.
Unfortunately, P.S.R. works better in theory than in practice — at least for every stakeholder besides the activist investors who imposed P.S.R. on the industry in the first place.