Before the start of the COVID-19 pandemic, consumers hardly, if
ever, gave thought to “supply chains.” For most people, it
sounded like a corporate buzzword, similar to “synergy” or “deep
dive.” However, two years later, consumers are painfully aware
of how important supply chains are to the availability and cost
of common products.
Continued backlogs in producing and transporting goods are one
of the main drivers of inflation that reached a four-decade high
earlier this summer. This is not going unnoticed by consumers.
Polls continue to show that inflation remains one of the most
important issues to Americans.
As both supply chain problems and inflation are starting to show
some signs of easing, the last thing consumers need is a work
stoppage that shuts down freight and passenger rail lines. That
is why last month’s recommendation from the Presidential
Emergency Board (PEB) of neutral arbitrators appointed by
President Joe Biden is so crucial.
Biden issued an Executive Order in July to create the
arbitration board after several rounds of negotiating between
freight railroads and several labor unions that represent
various rail workers failed to achieve an agreement.
The recommendations issued by the PEB are not binding, but they
do represent a framework for a potential deal. There is a lot to
like for labor and the railroads, as well as many things that
will be tough to swallow for both sides.
Most important, for rail workers, wages would increase by 24%
during the five-year period from 2020-24, with a 14.1% wage
increase becoming effective immediately. The key aspect of this
is that because it is retroactive to 2020, it would result in
more than $11,000 in immediate payouts to employees on average.
For the railroads, the deal would help them maintain the kind of
flexibility that will allow them to quickly respond to their
customers’ needs. This is crucial for the industry to remain
competitive with other forms of transportation, such as trucking.
To be clear, this is not a perfect agreement for either side. If
you gave both industry and labor the chance to write their
preferred Collective Bargaining Agreement, neither side would
have written the framework recommended by the PEB. That should
be taken as a sign that the administration’s experts succeeded
in coming up with a recommendation that is fair and requires
compromises and concessions from both sides of the bargaining
table. This tracks with many of the recent policy wins in
Washington, all predicated on compromise.
The PEB’s recommendation triggered a 30-day cooling off period,
which gives the two sides a chance to reach an agreement. If the
two sides fail to agree to a new deal by Sept. 16, there could
be a work stoppage that would shut down our nation’s freight
rails, which move about 40 percent of the nation’s freight in
terms of tonnage.
This would be absolutely devastating for consumers. Freight rail
moves many of the goods we consume daily, including many
consumer products found on store shelves. Disrupting the
movement of that volume of goods would cripple supply chain and
drive inflation even higher, at a time when Americans simply
can’t afford more price increases.
Both railroads and labor unions want the best possible
deal—workers want deserved pay increases and a better quality of
life; railroads want to remain competitive with other modes of
transportation. And, they both will have to live with whatever
the final deal is.
But, one thing is clear: If they can’t come to an agreement that
avoids a work stoppage, it will be a bad deal for our economy,
and millions of Americans will be forced to live with the
consequences of broken supply chains and higher prices.
Ken McEldowney is executive director of Consumer Action,
national consumer advocacy and education membership organization
based in San Francisco.