The Railroad Strike Highlights A Forgotten Part Of The Supply Chain: Workers

The U.S. has averted a possible freight railroad strike—for now.

After a marathon 20-hour negotiation session hosted by the Department of Labor, railroad unions and management reached a tentative deal to improve pay and provide more time off for workers. The tentative agreement was reached just days before hundreds of thousands of rail workers planned to go on strike.

While the averted strike provides relief for now, it illuminates a changing dynamic between workers and companies—and exposes major vulnerabilities at the heart of the supply chain.

The Forgotten Part of the Supply Chain: Workers

Railroad workers are arguably the backbone of the American economy. Nearly 30% of the country’s total freight is transported by rail, according to 2019 data from the U.S. Department of Transportation.

If the strike had gone ahead, its economic consequences could have been catastrophic: The Association of American Railroads estimated a railroad shutdown would have cost the U.S. economy $2 billion per day.

Nearly everything, from gas to everyday consumer goods, would have spiked in price—or may not have been available at all.

Experts say the scenario highlights one of the most overlooked and fragile aspects of the supply chain: Labor.

“We think of the supply chain as trucks and factories, but there are people who make it all run and are doing the hard labor,” says Tim Kraft, associate professor of operations and supply chain management at North Carolina State University. “They’re critical. They’ve been working very hard over the last few years.”

Railroads in particular were stressed during the pandemic. Freight companies, which had been cutting back their workforces for years, experienced high cargo volumes as stay-at-home measures pushed Americans to shop online.

One major railroad management company, BNSF Railway, introduced a points-based attendance policy during the pandemic to keep its scant labor force on par with demand. A worker would start with 30 points, and points were deducted if the worker wasn’t available to work during a certain period. If the balance fell to zero, workers faced a 10-day suspension.

The system penalized workers for taking time off for doctor appointments or funerals, often pushing workers to their breaking point—including some even reporting falling asleep while working. The attendance policy was one of the biggest contributing factors to the potential strike.

Did the Pandemic Put the Power Back in the Hands of Workers?

According to Kraft, laborers have borne the brunt of supply chain kinks since the start of the Covid-19 pandemic. As he puts it, they’ve often been given more working hours to try to “put out the fire,” of being short staffed. Many have been overworked for years, a concept best illustrated by workers leaving intense industries, such as trucking, in droves.

The most recent threat of a railroad strike could have a domino effect, says Kraft. Laborers enduring difficult working environments are likely to start demanding better conditions and threaten strikes if those conditions aren’t met.

“It wouldn’t surprise me to see similar labor disputes start appearing in other industries,” Kraft says. “If companies aren’t taking the initiative, they’ll hear from their employees soon enough.”

There are currently six strikes taking place across the country, according to AFL-CIO’s strike map. The largest nurse strike in history started on Sept. 12 when nearly 15,000 nurses in Minnesota walked off the job to protest understaffing, which they claim has harmed patient care and has overworked staff.

According to data from the Bureau of Labor Statistics, in 2021, there were about three times as many major work stoppages than there were in 2020—and that doesn’t include strikes involving fewer than 1,000 workers.

“Throughout 2021, strikes provided workers critical leverage to bargain over fair pay, safe working conditions, and a share of the pandemic recovery,” the Economic Policy Institute said in a blog post.

Labor unions have also seen a revival, in part due to the pandemic. Workers at large corporations, including Amazon and Starbucks, are now unionizing to demand better pay and working conditions.

Read more: Are Labor Unions Good For Public Companies?

What’s Next for the Rail Agreement?

Rail union leadership and management have reached a tentative agreement, which includes higher pay and time off that can’t be subject to disciplinary action.

Now, union members must vote to ratify the agreement before it goes into full effect. A potential strike has been averted for several weeks due to language included in the deal, according to Reuters. But the possibility of a strike in the future isn’t yet completely out of the question, as tentative agreements have been struck down by labor unions in the past.

There’s little consumers could do to prepare for a massive rail strike, Kraft says. Instead, he says consumers should realize how interconnected the U.S. supply chain is and understand that its kinks—including those related to labor issues—aren’t going to be fixed overnight.

“There’s going to be disruptions, there will be moments where things aren’t on shelves still, and moments where items still cost more than they used to,” Kraft says. “It’s a mentality we should all prepare for.”

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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