U.S. Rail Service interruption could cost economy $2 Billion per day

A newly released Association of American Railroads (AAR) report found that a nationwide rail service interruption would dramatically impact economic output and could cost more than $2 billion per day of a shutdown. If negotiations remain unsettled with the remaining unions by Friday, September 16 at 12:01 AM, Congress must act to prevent a service interruption that would immediately harm every economic sector served by rail. Failure to act could idle more than 7,000 trains daily and trigger retail product shortages, widespread manufacturing shutdowns, job losses, and disruptions to hundreds of thousands of passenger rail customers.

Ian Jefferies headshot
Ian Jefferies

“As the freight sector heads into peak shipping season, a nationwide rail work stoppage would result in an unnecessary $2 billion daily economic hit,” said AAR President and CEO Ian Jefferies. “President Biden’s PEB recommended terms that would maintain the highest quality health care coverage and result in compounded wage increases of 24%, bonuses totaling $5,000 — the highest pay increases in nearly 50 years.

“Like those unions that have already tentatively agreed to the PEB deal, each of the remaining unions can still enter into agreements based on these recommendations. However, should negotiations fail and result in a work stoppage, Congress must act to implement the PEB recommendations — rewarding employees and stopping unnecessary economic harm and uncertainty for rail customers.”

Specifically, the report updates a 1992 Federal Railroad Administration (FRA) econometric study to quantify the potential impacts of a national rail shutdown on employment and economic output in today’s dollars. Additionally, the report outlines how the lost economic output would harm manufacturers, distributors, retailers, and consumers.

These negotiations culminate as supply chain challenges remain and demand rail service from agricultural and retail shippers peaks ahead of the harvest and holiday shopping season. The delay in concluding this round of negotiations is causing railroads and their customers to make contingency plans and may force railroads to take responsible operational steps days ahead of the September 16 deadline to ensure the safety and security of sensitive rail shipments.

As shippers consider their contingency plans, the new AAR report also outlines how other transportation and logistics partners are not positioned to take up the slack and keep goods moving efficiently across the nation should a service interruption occur. Specifically, in the first half of 2022, more than 75,000 rail shipments began their journey each day. In the event of a shutdown, these shipments would sit idle.

Recognizing how rail service interruptions could cripple the economy, Congress created a unique labor negotiations structure for railroads. The federal statute — the Railway Labor Act (RLA) — governs the bargaining process between the rail industry and its 115,000 unionized employees, encouraging parties to settle disputes without disruption to national rail service. Ultimately, Congress has the power to intercede and avert a shutdown.

As the clock races toward the final deadline, railroads are calling on Congress to ready legislation that would implement the PEB’s recommended terms as a whole. Such an agreement would provide employees with a long overdue pay raise that includes an immediate payout of $11,000 per employee and maintain first-in-class health coverage for railroaders.

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