(TND) — The clock is ticking on a potential rail strike, and experts say even a short work stoppage could deal a serious blow to the economy.
The timing of a potential strike, just a couple of weeks before Christmas, may concern shoppers. But retail groups say stores are already stocked.
The potential disruption to the holidays lies mostly with e-commerce, late-season restocking, and perishables like food.
Holiday meals could be impacted.
“There are consequences for consumers and for the holidays, it just may not be that Santa’s sleigh is impacted directly,” said David French, senior vice president of government relations at the National Retail Federation.
A rail strike could begin as early as Dec. 5, though it likely wouldn’t begin until Dec. 9 at the soonest. Four of the 12 rail worker labor unions have rejected the tentative agreement. All but one have cooling-off periods that extend to Dec. 9. The exception is the Brotherhood of Railroad Signalmen, which has a cooling-off period that ends Dec. 5. But BRS is expected to extend its cooling-off period to align with the other unions.
Today, negotiations between rail companies and labor unions hit a major snag when a fourth union rejected a tentative deal brokered with help from the Biden administration in mid-September. At the center of the stalemate is sick leave. https://t.co/Z8nnjhdCXv
— The National Desk (@TND) November 22, 2022
Eight of the 12 labor unions have ratified the tentative deal.
The exclusion of paid sick leave seems to be the main sticking point for those who have rejected the labor pact.
If the sides don’t come to an agreement, then a piece of decades-old legislation, the Railway Labor Act, gives Congress authority to intervene.
Congress could extend the cooling-off period, implement the unratified agreement, or dictate the sides accept the recommendations of the Presidential Emergency Board.
Negotiations between the railway employees and the carriers go back to 2019, and the offer on the table now includes a 24% wage increase during the five-year period from 2020 through 2024, including an immediate payout on average of $11,000 upon ratification.
President Joe Biden said in September after the tentative deal had been reached that it was a “win for tens of thousands of rail workers” and a “win for America.”
A rail strike would be “devastating,” according to Bradley Martin, the director of the RAND National Security Supply Chain Institute.
“If a strike were to occur, the effects would be felt widely and immediately,” he said.
“Rails occupy a very unique position within the U.S. supply and transportation chain, and they are as close to lifeblood as anything could be,” Martin said.
A strike would have “ripple impacts” with hits to inflation and the potential to reignite port congestion, said Jess Dankert, vice president for supply chain at the Retail Industry Leaders Association.
She cited a statistic provided by the Association of American Railroads that 40% of freight on any given day is moved by rail.
The Association of American Railroads also claims a rail strike would result in a loss of economic output totaling about $2 billion per day.
“Turning off that tap and taking that capacity out of the system just has tremendous impacts on not just the goods that are on those trains, but just the ripple effects beyond that,” Dankert said.
“We can ill afford any sort of further disruption in supply chains in the economy generally,” she added.
And the supply flows wouldn’t just snap back to normal after a strike, or even after disruptions that occur leading up to a strike.
French said we could start seeing impacts as early as next week, as carriers prepare for the potential of a strike.
He said even a couple of days of disruption could have a “profound impact.”
No one wants a rail strike, but big rig drivers could step in and fill some of those freight needs, said Todd Spencer, president of the Owner-Operator Independent Drivers Association.
“Should one take place, drivers would be, in certainly some instances, would be asked and expected to step up and do certainly more than they have to try to pick up as much as possible the increased demand,” Spencer said.
But the void would be massive, requiring about 467,000 additional long-haul trucks per day to handle that idled rail freight, according to the Association of American Railroads.
Spencer said that’s a big number, though he can’t vouch for its accuracy.
Still, he said, truckers would do what they could to help, and they’d prioritize time-sensitive freight.
They can say it as much as they want. But we'll keep refuting the driver shortage myth. The facts are on our side.#truckers #noshortageoftruckers #TruckDriver https://t.co/qdWHZohx87
— OOIDA since 1973 (@OOIDA) November 10, 2022
Dankert, with the Retail Industry Leaders Association, said it’s “critically important” to prevent a strike, even if that means Congress getting involved.
“I think there’s recognition that this is an extremely important issue,” she said.
French, with the National Retail Federation, said it’s risky to just sit back and assume Congress will save the day.
He said Congress does not like getting involved in labor disputes, this is a lame-duck session, and members have a lot of other important matters on their plates.
And then there’s the worry that Congress will wait until the last minute to prevent a strike, at which point carriers will have likely already halted some operations and disruptions would have already taken place.
“Congress has an unfortunate habit of going right up to the brink when it comes to tough decisions,” French said. “This is one where Congress could save the U.S. economy a lot of money by making an early decision, but I’m not optimistic.”