How many times, over how many years, have you heard corporations advertise that their most important asset, the key to the success of their business, is their employees? More than once, I’m certain, and more than once is more than enough.
Railroads are corporations, and use iterations of this mantra. You can read it on their websites:
“We offer…competitive benefits focused on your total well-being—physical, emotional, financial, and social.”
“We know __’s success is dependent on our people’s success. At __ we offer a collaborative culture of inclusion, growth, and innovation…to help our employees thrive professionally and personally.”
“The key to our more than 155 years of success is our people.”
“We encourage employees to raise questions and concerns…By intentionally creating a culture of equality and belonging, we can…realize our tremendous potential—not only as a company but as individuals.”
Und so wieter, ad infinitum, und ad nauseum.
It’s helpful to keep in mind what exactly a mantra is. A mantra is a meaningless word or phrase that when repeated in a chant, brings comfort to the one chanting.
Right, the employees are our most important asset…right up until contract time; right up to the moment when Section 6 notices are exchanged, and then the employees aren’t quite so important. Hell, at contract time, they aren’t even on the asset side of the ledger anymore. They’ve been flipped from assets to liabilities, in an accounting maneuver that would leave Andrew Fastow of the departed Enron breathless.
Then, at contract time, having lost most treasured asset status, employees get this as recorded on page 32 of PEB 250’s report to the President—
“The carriers maintain that capital investment and risk are the reasons for their profits not any contributions by labor”—a statement so profoundly arrogant, and so arrogantly ignorant of the business of railroading, that it could only have come from an investment banker…or Margaret Thatcher.
The report continues—"The carriers assert that since employees have been fairly and adequately paid for their efforts and do not share in the downside risks if the operations are less profitable, then they have no claim to shares in the upside either—”
All that stuff about we realizing our potential, our success, etc. etc.—a mantra, or worse, worse than the normal bs, it’s the b as in bait in the bait and s as in switch .
A cynical jaded bastard like myself might take a moment to ask the unidentified carrier advocate(s) who provided this information to the PEB, if railroad labor makes no contribution to profitability, why do carriers spend so much time, effort, and money training those employees? measuring the efficiency of those employees? requiring employees to report faults and anomalies in the perfect, never-failing capital equipment that makes the employees’ contributions so marginal? Why do railroads measure their own performance with metrics directly dependent on employees’ efficiently executing a service plan; you know those pesky measures that railroads report to the Surface Transportation Board like average train speed, terminal car dwell, trains holding for power, trains holding for crews? And the other measures? Like cars dispatched per yard crew hour? Percentage of connections made? Why measure those? Because connections don’t make themselves. Because track doesn’t maintain itself. Because brake systems don’t fix themselves. Trains don’t build themselves and they don’t move themselves.
A cynical jaded bastard like myself might point that employees do in fact “share” in the “downside risk” or were all those laid off in 2009 kept on the payroll?
A cynical jaded bastard like myself might point out that operating employees daily engage in a risk not experienced by those investment bankers, the risk of losing limb and life while performing service for the railroads.
--A word on arrogance, ignorance, and risk: I’ve found, through extensive personal experience, that railroad employees will accommodate a measure of arrogance directly proportional to one’s competency, capability, knowledge, and leadership. I’ve also found, through extensive personal experience, that railroad employees will tolerate a modicum of ignorance, provided one is humble enough and willing enough to learn. What is not tolerated, cannot and should not be tolerated, is the combination of arrogance and ignorance that jeopardizes both the safety and the efficiency of the operation.
As for risk, well the line officer’s job, his or her entire job, revolves around reducing risk : anticipating and mitigating those conditions, events, circumstance that threaten the safety and success of the service plan. We’re talking here about real risk and not the mostly mythic “opportunity risk” of those courageous, lion-hearted investment bankers, asset strippers, hedge-fund buccaneers who valiantly and gloriously struggle in the capital markets in selfless service to the gods of arbitrage, all the time using OPM—other people’s money.
Full disclosure: I have never placed, or “paid,” a premium on/for “labor peace.” Back in the day when I had a measure of responsibility for all things railroad, my reluctance to regard employees covered by collective bargaining agreements as “partners” in the great quest for railroad excellence caused no little consternation to certain highly placed officials. I was even sent to a corner for a time to ponder the error of my ways in insisting that covered employees not be paid for not working and actually complete their work schedules. Who would have thunk? No hard feelings though. You do what’s right and deal with the consequences later.
There was “them,” protected by their agreements; and there was “us,” responsible for actually running the railroad. One precluded the other. There could be no such thing as “partnership.” Years before Robin Thicke made headlines with a song, I was dead-set against "blurred lines."
I have never worked an assignment on the railroad without somebody nominally reporting to me and protected by a CBA saying to me, “If you don’t like the way I do it, I’ll go home and you can do it yourself.” And I have always responded, “Go home. I’ll do it myself.” I was fond of telling all those in supervision who would listen that the two most important words I learned as a trainmaster were “Go home.”
Yes, I have a vested interest, and that interest is in proper management of railroad operations.
Enough of that. The current labor strife roiling our industry cannot be separated from recent history and that recent history cannot be separated from the not-so-recent history.
In 1980, railroads in the US employed approximately 540,000 people.
By 1990, the number employed had been halved (thanks to consolidation, bankruptcy, deregulation, abandonment, attrition, buyouts) to 278,100.
In 2000, the number had declined another 25 percent to 206,700.
After the great recession of 2008-2009, the number employed fell to 178,000, recovering to 202,200 in 2015.
Then another round of severe force reductions began. By January 2020, before the pandemic, employment was below the 2010 mark to 160,500.
And after the pandemic? In December 2020, employment had fallen to approximately 144,500, one-fourth of the 1980 level.
YEAR EMPLOYMENT (000)
1980 539.7
1990 278
2000 206.7
2010 177.9
2015 202.2
(1)2020 160.5
(12)2020 144.5
Railroad freight ton-miles, however, displayed an upward trend for most of the four decades:
YEAR EMPL (000) TM(MILLI0NS)
1980 539.7 932,000
1990 278.1 1,033,969
2000 206.7 1,465,960
2010 177.9 1,691,004
2015 202.2 1,738,283
(1)2020 160.5 (2019) 1,614,498
The ratio of ton-miles to employment tells almost the whole story:
YEAR T-M / EMPLOYEE
1980 1,726,885
1990 3,717,975
2000 7,092,211
2010 9,505,363
2015 8,596,850
2020(19) 10,059,178
We can use the ton-miles per employee and the reported average revenue per ton-miles to determine how much revenue each employee generated:
YEAR RATE/T-M($) REV/EMPL($)
1980 .0287 49,561.60
1990 .0266 98,898.13
2000 .0226 160,283.97
2010 .0332 315,578.05
2015 .0397 341,294.94
2020 .0442 444,615.67
We can next compare revenue generated per employee to the average wage (excluding all supplementary benefits) per full-time equivalent employee for certain years:
YEAR AVG WAGE ($) REV/AVG WAGE
2000 63,353 2.53
2010 81,436 3.87
2015 95,455 3.57
2020(19) 103,306 4.30
So, with each employee generating revenue equal to 4.3 times his or her salary, with the 70 percent improvement of that ratio in twenty years, the improvements in labor productivity, output per employee, rather than “opportunity risk” underpins the industry’s cash flow. No surprise then that in 2019 the American Journal of Transportation named railroads as the most profitable industry the US ..
Still the industry claims it cannot afford to give its employees any guaranteed sick days.
It’s certainly not a question of money.
Is it a question of service delivery? During the last five years, how well has the industry provided the service it advertises to shippers?
One of the ways we can judge is to look at the average number of trains ready for dispatchment from yards but held due to a shortage of crews or locomotives. We called this “cutting a train.” The train could be cut for power (no available locomotives) or it could be cut for a crew (no road crew available), or it could be cut for other reasons, but crew and power were the most frequently cited causes back in my day.
Cutting a train for power or crew meant someone screwed up—but that someone wasn’t you, the hump trainmaster (although my least favorite general manager once berated me for not tacking the humper slug sets onto a train and dispatching it that way. “At a maximum speed of 15 mph? You sure about that?” I said just before the line went dead).
Cutting a train had zero positive impact on your yard operation. After all, the cars were sitting there, all made-up with no place to go, but it did have certain statistical advantages. The cars in the train so cut came off your yard inventory; the terminal dwell time stopped accruing at the moment of “cutting,” and if I recall correctly, you could even get credit for “scheduled connections made” if the train was cut. But cutting a train meant you were short of a critical asset—the prime mover(s), human or mechanical, of the service. Somewhere, somehow your asset allocation or utilization had come up short...
Railroads report to the STB the daily average number of trains held per week by cause—crew, locomotive, or “other”—and by type of train—intermodal unit, coal unit, grain unit, manifest, etc. The railroads use differing methodologies to determine the numbers reported, and railroads may include trains not cut for power or crew, but held for other reasons.
Still, the specific details of the methodology are less important than the overall trend of the average number of trains being held. At least for me. The trend might tell us whether we’re moving on up the ladder of service delivery or moving on down. The trend isn’t always your friend, but it’s always important. So, I looked at the daily averages for the last 40 weeks of 2017, all of 2018, 2019, 2021, and the 48 weeks of 2022 ending November 30 for four Class 1 railroads, two “eastern” and two “western.” Below are the average daily trains held for those years. I omit by design the pandemic year 2020.
2017 2018 2019 2021 2022 (11/30)
119.7 252.7 175.1 195.9 344.8
Ton-miles in 2018 exceeded 2017 totals by about 3 percent, while 2019 ton-miles were below those of 2017. I haven’t been able to find the total for 2021 but rail traffic for 2022 is running below the traffic measured for that previous year. Despite the reduction in both intermodal and freight car loadings, the average daily “cuts” have soared year over year.
The picture would be a bit clearer if we knew the average daily number of freight trains operated by these four carriers, but I can’t even find an estimate for that, other than the guess I made a year or so ago of 2500 through-freight trains daily. If I’m anywhere close to being right, then in 2022 well over 1 in 10 trains each day are on the “holding power, crew, other” list.
I repeat there is a lot going into the "trains holding" metric that may not involve the shortage of crews or locomotives, but the trend demands some investigation.
Every operating decision is a financial decision and in return every financial decision is an operating decision. This means "efficiency" is not the same thing as "productivity," which is the gross measure of output per employee-hour. Efficiency is the efficiency in using the assets to deliver the service plan. Efficiency does not stand separate and apart from the quality of the service. It is the role of management to find that point of convergence where safety, effficiency, and service delivery reinforce rather than undermine each other.
Profitability that makes it impossible for train operations to meet a demand for service is not an effective business plan.
David Schanoes
December 6, 2022
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