Joe Biden prides himself as an exceedingly pro-labor guy. Only, circumstances, particularly now with his push to force a stop of a national railway worker strike, have undercut that image. Especially that Congress is backing him up, with leaders of both houses saying they’ll prevent a rail strike, according to the New York Times

The real pity is that in this latest action, the problem hasn’t been greedy workers but managers at the biggest rail companies who have slashed workforces over the years beyond a safe point in the driver for higher profits. If a strike does happen as a result of this intransigence, expect the economy to blow up, inflation to rise, and a recession to move more certainly in this direction.

Biden’s rhetoric has been all labor, all the time, but the overall environment hasn’t been agreeable. Like the failed attempt to prop up the Pro Act: a predictable first step to many things, including the attempt to end true independent contractor businesses and force everyone to be employees in hopes they’d join unions. Plus, there were the problems like forcing release of employee contact information to unions, whether the individuals wanted it or not. (And acknowledging that there’s a lot of illegal misuse of IC status on the part of corporations that government should have already addressed but hasn’t, which raises the question of why not.)

Another example is the proposed independent contractor rule from the Department of Labor that’s actually an attempt to sneak in the ABC test of employee status that the PRO Act tried to institute. This shows that the Biden administration is more pro-union than pro-worker.

But, again, that can only go so far when there’s a conflict of interests, in this case framed as rail workers on one side and the overall economy on the other.

There are good reasons why rail workers have given up on simply taking what they’re offered—they’ve been extremely angry. A raise was certainly part of what they had sought, but the grand sticking points have been attendance, sick time, and scheduling. The rail lines wanted workers available on demand and restricted the amount of sick time.

If you look at the data only from the Bureau of Transportation Statistics, employee injuries and fatalities have been falling since at least 2000.


[Injury graph]

However, the number of employees hasn’t been constant. In October 2000, using non-seasonally adjusted numbers, there were 220,200 railroad transportation workers. Move to October 2022 and there were 142,300 workers. There were 8,423 injuries among rail workers in 2000, or 38.3 injuries per thousand workers, using October employment numbers as a reference point. In 2022, the same figure would be 3,224 injuries, or 22.7 injuries per thousand. A reduction, certainly, but much of the drop in raw numbers of injuries down because of smaller numbers of workers.

And yet, rail freight traffic has gone up immensely over the same period. In October 2000, the number of hauled containers and trailers was 782,694. By October 2021, it was at 1,129,125, or up 44%. Sure, longer trains, maybe systems improvements, but that’s a lot more work that workers are ultimately responsible for.

However, hire more workers and profits go down, even though the industry has well-padded profit levels.

Aswath Damodaran, a professor who teaches corporate finance and valuation at the Stern School of Business at New York University. He periodically updates his running analysis of corporate margins by industry. It offers a fascinating look at who’s really in the money. His results show that the railroad segment of transportation has an average net margin—”profitability, after all expenses and taxes, accruing to stockholders in the firm”—of 28.9%.

For perspective, the median value for all industries is 7.9%. The heights the railroad industry reaches are the fifth highest of any industry, only exceeded by money center banks (the really big ones), non-bank financial services, regional banks, and entertainment software. Look at “pre-tax, pre-stock compensation operating margin” numbers—before paying taxes or large stock grants. From that view, tobacco is at the top at 44.7%. And second highest? Railroads with their 42.4%.

In 2021, BNSF Railway Company, owned by Berkshire Hathaway
and its CEO, Warren Buffett, had revenue of $22.5 billion, according to data from S&P Global Market Intelligence. Profits before taxes were $9.3 billion, or 41%.

Or, another example, CSX
Corp., which had 2021 revenue of $12.5 billion and profits before taxes of about $5 billion, which is 40%.

Could they hire more people and take some stress off workers? Certainly. But they won’t back down on that because it upsets their strategies that create the large amounts of profits.

And yet, you won’t hear much about that. The treatment by politicians and the press is that it’s time to save the economy from these selfish strikers, rather than stating the obvious, that it’s recalcitrant executives who insist on restricting worker headcount as the way to balance the cost of running the company.


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