The economy hangs on today’s railroad union vote

The economy hangs on today's railroad union vote

Illustration: Aida Amer/Axios

While everyone was paying attention to the November election, members of the country’s 12 railroad unions were voting on a labor contract. The process has been a wild ride so far — and it could be headed off the rails.

Why it matters: The two largest unions, representing about 62,000 engineers and conductors or about half the entire group, are set to announce vote results Monday, and the health of the US economy is hanging on their yeas and nays.

  • The success of this deal is also a test for the White House, which brokered and sold it as a big win in September.

State of play: A no vote from either or both of these unions would raise the threat level of a strike, swinging the balance of power in labor’s favor.

  • But even if both groups vote to ratify the deal, this isn’t over. Three other, smaller unions have already voted against the contract and are now back in negotiations.
  • The deadline to come to terms was already moved from last weekend to Dec. 4. If one of the unions votes no on Monday, the deadline will move to Dec. 9.
  • After these dates, a strike could happen at any time — unless lawmakers step in to implement a cooling-off period or even force the workers to accept a deal.
  • “Our expectation is that no matter what happens, Congress is still going to need to step in,” said Scott Jensen, director of issue communications, at the American Chemistry Council. It’s one of many trade groups sounding alarms about the possibility of a shutdown.

Between the lines: The contract was brokered by union leadership and they’ve had a tough time selling the deal to rank-and-file members, many of whom are incredibly angry about how they’ve been treated in recent years particularly during the pandemic.

  • Union leaders trying to sell the deal to members have gotten a lot more blowback than they were expecting, in part due to a worker group — unaffiliated with these organized unions — that’s been pushing hard against the deal.
  • Unlike in a lot of labor deals, pay isn’t the main sticking point. It’s work-life benefits — particularly sick leave.
  • “We were somewhat surprised,” when members voted no, said Peter Kennedy, director of strategic coordination research at BMWED, the third-largest union, which voted down the contract in October.
  • “This is the best pay package I’ve seen in my career,” said Kennedy, a near-20-year rail veteran. “If employees are willing to vote that down because of the lack of paid sick time, that tells you something.”

The big picture: Any disruption to freight rail service would be a blow to the supply chain recovery and the economy.

  • A long-lasting strike — not an impossibility — could even tip the country into recession, according to the Chemistry Council. The group projects that a month-long strike would pull close to $160 billion out of the economy, and lead to a 1% decline in GDP.

More possible and also worrying: As the December deadline creeps closer, the freight rail companies will start shutting down certain shipments — of hazardous chemicals, say — ahead of a potential strike.

  • For example, in the run-up to the labor deal brokered in September, the rail companies stopped shipments of all hazardous chemicals — that meant a drop of nearly 2,000 carloads of chemical shipments for just one week in September.
  • Those chemicals find their way into some critical everyday necessities — chlorine, used to keep drinking water clean, as well as ethanol and ammonia, used for fertilizer.

What to watch: Businesses are prepping for disruptions, says Jess Dankert, vice president of supply chain for the Retail Industry Leaders Association. That’s when you’ll start seeing cargo get backed up at the ports, for example.

  • One reassuring note: Retailers are stocked for the holidays, she says. “We will still have Christmas this year.”

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