Congress working to avert rail strike & further supply chain snarls
Should railroad workers strike, insurers would quickly face inflationary pressures from the supply chain slowdown.
The U.S. House of Representatives passed a resolution on Nov. 30, 2022, to ratify a labor agreement between railroad unions and companies. The House’s vote formalized an agreement President Joe Biden made with railroad unions and companies in September that raised wages 24% by 2024.
Among the 12 major rail industry unions, eight had signed onto the agreement with Biden. The other four rail unions said they would strike unless more paid sick leave was included in the agreement. In a separate vote, the House added seven days of paid sick leave to the agreement.
In the days leading up to the vote, President Biden urged Congress to act, noting that as many as 765,000 people could be out of work in just the first two weeks of the strike.
“As a proud pro-labor President, I am reluctant to override the ratification procedures and the views of those who voted against the agreement,” President Biden said in a release. “But in this case — where the economic impact of a shutdown would hurt millions of other working people and families — I believe Congress must use its powers to adopt this deal.”
The resolutions now move to the Senate while the clock ticks down to a Dec. 9 deadline, which is the earliest railway workers could strike if an agreement isn’t reached.
$2 billion in daily losses
Should a nationwide rail strike happen, the economic losses could total more than $2 billion for each day of a shutdown, according to the Association of American Railroads (AAR), which notes the lost output would harm manufacturers, distributors, retailers and, ultimately, consumers.
With around 40% of domestic freight moved by rail, other modes of transportation would be unlikely to absorb all of the additional frieght volume that would accompany a rail strike, according to Rich Soja, global product leader of inland marine and North American head of marine at Allianz Global Corporate & Specialty.
The AAR reports an additional 467,000 long-haul trucks would be needed each day to handle the freight.
“In addition, rail is a particularly useful mode of transporting bulk commodities, agricultural products, hazard materials and other specialized goods that are not easily replicated — at least not efficiently — through other means,” Soja tells PropertyCasualty360.com. “So, truckers would be able to selectively pick up some capacity, but the hard reality is goods sitting awaiting strike resolution, or at best significant delays in transport.”
For motor carriers and fleet operators looking to pick up some of that extra volume, Soja says being selective on where they allocate already limited resources will be critical.
“They (motor carriers and fleet operators) may want to opportunistically utilize more owner-operators, but the ongoing qualified-driver shortage will not make that easy,” Soja adds.
A rail strike and the ensuing supply chain snarl would also amplify inflationary pressures at a time when auto insurers are already feeling the pain of soaring repair costs and wait times, according to Soja, who adds: “Consumers and fleet operators could hold on to older vehicles for a longer period of time, thereby increasing the risks of accidents from an aging fleet.”
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