(Bloomberg) — Railroads and unions have until Friday to resolve a labor dispute that risks a crippling shutdown of the nation’s freight-rail network, wreaking havoc on the US economy.
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President Joe Biden has become personally involved in trying to break the impasse, underscoring the stakes for Democrats with less than two months until the November midterm elections. The White House on Tuesday began contingency planning to ensure critical materials reach consumers, a signal negotiations aren’t progressing fast enough.
The two major unions still working to reach a deal cover some 57,000 workers. In the event of a strike, the 75% of newly-built autos that move by rail would be stranded at their factories. So would be tens of thousands of carloads that carry everything from wheat bound for bakeries to plastic pellets used in soda bottles.
Here are the four most likely ways the standoff will end.
A Deal
This is the best-case scenario for the US economy and for Biden. Critical materials, such as chlorine for water treatment plants, as well as key commodities and consumer goods would arrive at their destinations as usual. Inflation, a persistent issue for Biden and the nation, wouldn’t be exacerbated by a fresh supply-chain disruption.
Both sides have motive to avoid a strike, which would be an embarrassing and costly spectacle for the companies while depriving workers not just of immediate paychecks but also of the chance to negotiate their own contract, should Congress respond to disruption by imposing terms.
It’s not uncommon for heated, publicly hostile negotiations to end in last-minute agreements right before a potential strike.
There’s political upside for Biden, too: Reaching a contract agreement after contentious talks may be viewed as validation of the president’s negotiating skills. Biden intervened in the dispute on Monday, as he and Cabinet officials spoke with union and railroad representatives, according to a White House official.
However, the self-professed most pro-labor president in history could also be judged by his labor allies on the terms of any agreement.
A Biden-appointed board last month issued a set of recommendations to resolve the dispute, including wage increases and better health coverage. But the proposal did not include terms on scheduling, attendance and other issues important to the two unions holding out for a deal, affiliates of the Teamsters union and of the International Association of Sheet Metal, Air, Rail and Transportation Workers.
They have complained that under rail companies’ punitive attendance policies, employees can be and have been fired for getting sick or going to the doctor. The companies have said they provide paid time off that employees can use for medical appointments.
Work Stoppage
A strike by employees, or a lockout by management, would have immediate and far-reaching consequences for the US economy. US supply-chain woes that emerged during the pandemic would intensify, should workers remain off the job for any length of time, and the political fallout for Biden and Democrats could be catastrophic.
Freight railways carry roughly 30% of US goods. If their shipments stop, the outcomes could include bare store shelves, empty grain silos and barren lumberyards, costing the economy more than $2 billion a day.
That would likely kill any political momentum Biden and his Democratic Party gained from a series of legislative wins and positive economic news over the summer. The work stoppage would come on the heels of a new report Tuesday showing consumer prices unexpectedly rose in August compared to July.
Republican criticism of the president’s handling of the economy would gain fresh resonance, after Democrats made headway in recent weeks parrying those attacks and shifting voters’ attention to issues such as abortion rights and former President Donald Trump’s efforts to overturn his 2020 re-election defeat.
Failing to reach a deal may also fuel questions about Biden’s leadership, after he invested personal time and effort on an agreement.
A strike would also impact rail operator Amtrak, which is preemptively canceling some long-distance routes that operate on freight-rail owned tracks. Biden was a prominent Amtrak traveler who earned the nickname “Amtrak Joe” for frequently commuting on the rail system to his home in Delaware when he was a US senator.
For railroads, economic and reputational costs are on the line, especially if most Americans sympathize with workers’ demands.
For the labor movement, a strike by tens of thousands of employees would be a galvanizing event, a demonstration of workers’ power in the US highlighting concerns about work-life balance common among employees across the economy. But it would also carry serious risks — including a congressional intervention that would force railroad workers back to work under inferior terms.
Congress Intervenes
Two Republican senators introduced a resolution Tuesday that would impose the recommendations of Biden’s emergency board, an illustration of growing concern in Congress. Representative Steny Hoyer, a Maryland Democrat who is the no. 2 House leader, said on Bloomberg Television’s “Balance of Power With David Westin” on Monday that Congress would act to avert a strike.
“We can pass legislation if needed,” he said.
While an intervention would be a fraught option for the Democratic-controlled and labor-friendly legislature, there are several different routes lawmakers could take.
US union members generally have the right to go on strike in hopes of winning better contracts. But the Railway Labor Act imposes additional hurdles to prevent work stoppages by rail workers. They include a greater role for Congress, which could impose a collective bargaining agreement on the two sides.
A resolution imposing a contract would require 60 votes in the Senate to pass, assuming a filibuster by pro-labor senators.
Republicans and industry groups have pushed for Congress to impose a contract, rather than another extension of negotiations, while unions have urged lawmakers not to intervene. The most appealing outcome for many Democratic lawmakers would be a successful brokering of an agreement by the Biden administration.
Iowa Republican Senator Chuck Grassley said a strike would be “very damaging to Democrats who want to keep control of Congress in the midterm elections.” He and other Republicans on the agriculture committee have emphasized the volatility of fertilizer prices, which have already yo-yoed this year following Russia’s invasion of Ukraine.
A Delay
Friday’s deadline is not absolute. The two sides could voluntarily agree to extend a “cooling off period,” meaning additional time to negotiate without a strike or lockout.
For union members concerned about losing leverage, such extensions would be easier to stomach if they’re brief — perhaps only 24 hours at a time — and accompanied by signs of progress toward an acceptable contract.
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