More Supply Chain Chaos: Looming US Rail-Strike Poses Severe Economic Consequences for the Biden Administration
America’s rail system is about to collapse, and the White House is making every effort to prevent a complete supply chain disaster.
tens of thousands of rail workers are preparing to go on strike as early as the end of the week, a railroads and unions remain embroiled in negotiations over pay increases and updated work rules. Both railroads and workers have been in repeated disputes since January 2020, after a labour contract cemented wages at 2019 levels. The National Mediation Board was unable to come to an agreement over the summer, prompting the Biden administration’s Presidential Emergency Board to endorse a 24% compounded wage increase and $5,000 in bonuses by 2024.
However, that didn’t satisfy unions, who are voicing opposition against new attendance policies that that will require workers to remain on call and be ready to come to work on most days. “Our members are being terminated for getting sick or for attending routine medical visits as we crawl our way out of worldwide pandemic,” union leaders said over the weekend, as quoted by Bloomberg. The updated work rules “are destroying the lives of our members, who are the backbone of the railroad industry.”
Should the unions go on strike, railroads are predicting such a shutdown would cost the US economy $2 billion per day. Passenger railroad company Amtrak already started slashing several major long-distance routes on Tuesday, threatening additional service disruptions should an agreement fail to be reached by midnight on Friday. The Biden administration, in the meantime, is scrambling to avert a shutdown, with senior officials spending Monday and Tuesday conducting high-level negotiations with railways and unions.
The last time such a rail stoppage occurred was in 1992, lasting a total of two days. However, should such a service disruption transpire this time around, the US economy is not in a strong position to bear the brunt of the ensuing damages. The National Grain and Feed Association, which represents companies accounting for 70% of US grain shipments, warned that a rail shutdown would be detrimental during the fall harvest season. “Without rail service to move those crops, many facilities will begin to fill to capacity and may be limited on deliveries they can take from producers,” read a statement, as cited by Reuters. “The economic damages across the food and agricultural supply chain would be swift and severe.”
The problem would be further exasperated during a time when inflation is at the highest in over 40 years, and the global economy has yet to recover from pandemic-era supply chain disruptions. The timing couldn’t have been worse for the Biden administration as well, with the rail dispute threatening to erode the Democrats’ support from workers during the upcoming midterm elections.
Information for this briefing was found via Reuters, Bloomberg, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.