President Joe Biden of the USA has reported that a tentative deal has been reached to avert a potential railroad strike that threatens to disrupt the supply chain. Early indications are that companies and unions have reached a deal that could prevent the first national rail strike in the last two decades. This comes at a time when supply chain bottlenecks are shifting away from the East and towards the Gulf Coast. The respective ports will likely welcome the news of a deal to avert yet another challenging event for the shipping and logistics industry.
A timely intersection to keep commerce functional
Had the strike gone ahead as feared, there was a risk of supply chains significantly slowing down or coming to a standstill. This would put pressure on prices in an economy already grappling with inflation. For example, inflation has been hovering around a 40-year high. Industry leaders and customers had already petitioned the government to do everything possible to avert the strike. National retailers and energy companies were also concerned that a strike at this time might push them over the edge.
The president noted that the negotiated deal was a win for America during a Thursday briefing at the Rose Garden in the White House. At the same time, the Democrat Administration hailed the efforts to maintain the dignity of workers. Accordingly, the president reiterated his belief that unions and management structures can work together to solve problems.
Negotiating a complex job market
Currently, the US job market is far from entirely stable. It is true that the rate of unemployment has fallen and that overall wages are rising. However, some sectors still face pressures. A case in point is how railroads are dealing with service challenges. These challenges are mainly associated with shortages in the supply of workers. Notably, unionized members have been working without a formal contract since 2019. Moreover, union leaders expressed concern about the industry’s new attendance policies.
The deal, which featured concessions on both sides, is expected to last through 2024. Many terms reflect a proposal set up by a federal panel in the previous month. For example, a 24% wage increase will spread over the next half-decade. Members of the various trade unions covered by the agreement must ratify it before it moves from tentative to firm commitment status. Moreover, the deal has a retrospective element going back to 2019.
Key terms of the new agreement with unions
When the deal is ratified, there will be a 14.1% wage increment for the specified workers. Another 4% rise would then be delivered in July 2023 before a 4.5% increase in July 2024. The deal includes five annual lump sums of $1000. No alterations have been made regarding existing health insurance copays or deductibles. In addition, the impact of the deal has been almost immediate. For example, Amtrak has released information that it would restore its long-distance routes. These had been suspended ahead of Friday in anticipation of a possible strike if no deal was reached.
Amtrak is an inter-city train service that runs on tracks operated and owned by freight railroads. Therefore, it was likely that any strike could significantly impact these journeys. Moreover, several freight railroads (including Union Pacific Corp. and Norfolk Southern Corp.) indicated that there were pleased to have averted any stoppages. All their suspended services would be revived to avoid cargo being stuck on the networks.
The logistics industry prepares for all eventualities
Norfolk Southern has reopened its intermodal yards. These are responsible for transferring shipping containers. The yards had been closed on Wednesday as a contingency measure in case of a strike. Currently, they are accepting all types of cargo. Similarly, Union Pacific has reversed all embargoes on sensitive and hazardous cargos. Additionally, the provider collaborates with its clients to find ways to clear the backlog.
Two unions held out for better terms: the SMART-Transportation Division and the Brotherhood of Locomotive Engineers and Trainmen. However, these also reported that they could secure the changes they wanted. Specifically, the unions indicated that for the first time in their history, they had negotiated contract language that exempted time off for specific medical events when enforcing the policies on carrier attendance.
The contentious issues that are now resolved
There had been concern when the US railroads introduced strong attendance policies that were enforced using a points system. This was designed as a critical intervention to address the problem of absenteeism rapidly increasing in the previous year. The unions were outraged by some of the stipulations. However, under the new contract, medical appointments were excluded. Nevertheless, unscheduled sick days will continue to be penalized.
The rail companies were also concerned about some of the demands made by the unions. A case in point was the demand for 15 paid sick days per annum. Instead, the new agreement allows one additional paid day off work. However, that arrangement does not detract from preexisting conditions for paid time off. This compromise was consistent with the proposals made by the federal mediation panel.
The trade unions had requested an increment of 31% over five years, yet the employers were only willing to offer 17% initially. The presidential panel then found a happy medium that would give something to each side. In the previous years, the five-year increments amounted to no more than 13%, so this is a significant step-up. The new contract offers annual wage increments that range from 3% to 7%. This is higher than in the past, but there is the additional variable of inflation and increasing costs of living, according to Tony Hatch of ABH Consulting.
Wrapping up
The threat of a strike among rail workers could potentially derail the logistics and transportation industry in the USA. This could have severe repercussions for international trade since America is a major global importer. However, the proposals made by a federal mediation panel have been largely supported by a compromise deal waiting to be ratified by the trade unions. Disaster has been averted as the logistics industry continues to recover from the challenges of the previous two years.
