26 ms·

The nominal cost in days off is not even close to real cost to rail roads bottom line. There reason why they push back so hard is because the rail roads 1) run

by wahern 4y ago

The nominal cost in days off is not even close to real cost to rail roads bottom line. There reason why they push back so hard is because the rail roads 1) run extremely tight schedules, and 2) employ only barely enough employees to keep the network operating. In many cases there aren't enough employees to cover unscheduled absences, which can cause havoc with schedules. So the real cost is hiring more full-time employees; and you need a not insignificant number as they need to be scattered around the country. Moreover, because employee utilization rates are extremely high (from the rail workers perspective perhaps even over 100% on account of on-call time), adding extra employees will obliterate utilization rates and thus profit margins, at least from the perspective of CFOs and investors who will cry that, for example, a utilization rate dropping from 98% to 90% is a 400% increase in inefficiency. I'm not trying to defend the rail roads. But if you're a CFO or investor myopically focused on abstruse metrics, the impact would look intolerable.

toomuchtodo 4y ago
If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. Subjectively, I’d like to see how far things need to be pushed until it breaks. Is it illegal strikes? Is it derailments? ¯\_(ツ)_/¯ status quo is unsustainable considering demographics and labor supply shortages. As executive leadership or an investor, I would be concerned of what happens to critical infrastructure in the event of impacts to national logistics. Losses would be $2B/day. The US government will step in at some point, and there’s nowhere near enough military reserves for them to run a railroad on no notice (150k rail workers, 25k-30k prime movers).
- HDThoreaun 4y ago
  > If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. It's not that they can't afford it, it's that they really don't want to and they know that the government will never allow the workers to strike so there's no reason for them to negotiate on this in good faith. The problem with illegal strikes from the workers perspective is that they won't just lose their job, but also their pension that many have been contributing to for a decade plus.
- AnthonyMouse 4y ago
  > If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. Typically if you cause punishing suffering to your workers, they'll quit. The problem here is the unions have structural incentives to negotiate for unusual things (e.g. seniority rules, pensions) when in most open markets workers will prefer higher pay to any of that. But then the company's incentive is to get people to quit before they're eligible for what the union demanded, which is an extremely perverse incentive. Meanwhile the worker's incentive is to not quit before they're eligible, even when it sucks.
  - duskwuff 4y ago
    > Typically if you cause punishing suffering to your workers, they'll quit. The problem is... No, that isn't the problem. The problem is that railroad workers have very few choices of employer. There are only five major freight railroads in the US (BNSF, CSX, Kansas City, Norfolk Southern, and Union Pacific), and they're all fairly regional. A railroad worker who's fed up with their employer's policies will often only have one other company they could work for without moving across the country -- and the other company will often have very similar policies anyway.
    - hgfdhgdfhgdfh 4y ago
      What's preventing them from changing industries like coal miners?
- hgfdhgdfhgdfh 4y ago
  > If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. Why have these workers stayed at a company that caused them "punishing suffering" instead of somewhere else?
  - sofixa 4y ago
    Because if you've spent years working somewhere it might not be easy or even feasible to switch professions. When do you interview, assuming there are even other options where you live that will accept your experience?
  - prirun 4y ago
    While young, workers can endure more hardship. When older, they have a lot invested in their job and changing may be difficult or impossible. Companies do not make it easy for workers to change their job, especially if the worker is already working full-time + on-call. There are only so many hours in a day. And sick days are not so much of a problem for the young, so in their twenties, workers are only looking at their paycheck. That changes when they're 60. IMO it's cruel and ridiculous to tell people they can only have sick days on certain days of the week. Whoever heard of that?
hedora 4y ago
“Increase in inefficiency” isn’t a useful metric. It’s not like Mr. Burns is going to have Smithers club a baby seal to death for each wasted dollar. Instead, the utilization rate dropping from 98% to 90% is less than a 10% increase in labor cost. These are capital intensive businesses, so labor is a small fraction of overall costs. Mulitplying out, it’s probably a 1% increase in business expenditures, that (if mandated industry wide) can be passed directly on to the customers.
- wahern 4y ago
  It's precisely because fixed costs are so high why the railroads are so intransigent, especially considering they've been captured by activist investors. High fixed costs raises the stakes for swings in variable costs. And labor accounts for ~40% of variable costs (circa 2009 per https://www.ndsu.edu/fileadmin/challeyinstitute/Research_Briefs/USDA_Report-Railroad_Rates.pdf https://www.ndsu.edu/fileadmin/challeyinstitute/Research_Bri...) (I can't find numbers for variable or fixed costs as percentage of total operating costs, but it seems fixed costs are definitely >50%, especially since deregulation.) The import is that the railroads will likely need to be forced to provide sick days. Both because management and investors are so sensitive to variable costs, but also because there's a collective action problem--any one railroad doing this immediately puts them at disadvantage to the others in terms of stock prices. But just as you say, any mandate is unlikely to result in significant real costs to customers. Alternatively, maybe a Musk-like industrialist could swoop in with ideas on how to reduce fixed costs, shifting emphasis. But that seems unlikely. The whole industry seems to be completely geared toward extracting as much value as possible without investing capital.
legitster 4y ago
Is there a particular reason they can't keep on-call standby workers? At least in their major hubs?
- duskwuff 4y ago
  Because that would mean they'd have to hire, train, and pay more employees.
Lammy 4y ago
> employ only barely enough employees to keep the network operating For context, US railroads collectively employ ~150000 people, down from "peak railroad job" of ~2.2 million people in 1920: https://data.bls.gov/timeseries/CES4348200001?amp%25253bdata_tool=XGtable&output_view=data&include_graphs=true https://data.bls.gov/timeseries/CES4348200001?amp%25253bdata...
specialist 4y ago
As you know, there's a tension between profit and resilience. Resilience requires slack, which reduces profits. We regulate bank reserve ratios. A burden imposed onto each org in order to keep the whole system humming along. Labor should be treated the same way. Perhaps thru regulating utilization rates, by sector.

by wahern 4y ago

toomuchtodo 4y ago

If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. Subjectively, I’d like to see how far things need to be pushed until it breaks. Is it illegal strikes? Is it derailments? ¯\_(ツ)_/¯ status quo is unsustainable considering demographics and labor supply shortages. As executive leadership or an investor, I would be concerned of what happens to critical infrastructure in the event of impacts to national logistics. Losses would be $2B/day. The US government will step in at some point, and there’s nowhere near enough military reserves for them to run a railroad on no notice (150k rail workers, 25k-30k prime movers).

HDThoreaun 4y ago
> If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. It's not that they can't afford it, it's that they really don't want to and they know that the government will never allow the workers to strike so there's no reason for them to negotiate on this in good faith. The problem with illegal strikes from the workers perspective is that they won't just lose their job, but also their pension that many have been contributing to for a decade plus.
AnthonyMouse 4y ago
> If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. Typically if you cause punishing suffering to your workers, they'll quit. The problem here is the unions have structural incentives to negotiate for unusual things (e.g. seniority rules, pensions) when in most open markets workers will prefer higher pay to any of that. But then the company's incentive is to get people to quit before they're eligible for what the union demanded, which is an extremely perverse incentive. Meanwhile the worker's incentive is to not quit before they're eligible, even when it sucks.
- duskwuff 4y ago
  > Typically if you cause punishing suffering to your workers, they'll quit. The problem is... No, that isn't the problem. The problem is that railroad workers have very few choices of employer. There are only five major freight railroads in the US (BNSF, CSX, Kansas City, Norfolk Southern, and Union Pacific), and they're all fairly regional. A railroad worker who's fed up with their employer's policies will often only have one other company they could work for without moving across the country -- and the other company will often have very similar policies anyway.
  - hgfdhgdfhgdfh 4y ago
    What's preventing them from changing industries like coal miners?
hgfdhgdfhgdfh 4y ago
> If you can’t survive as a business without causing punishing suffering to your workers, you don’t have a right to exist as a business. Why have these workers stayed at a company that caused them "punishing suffering" instead of somewhere else?
- sofixa 4y ago
  Because if you've spent years working somewhere it might not be easy or even feasible to switch professions. When do you interview, assuming there are even other options where you live that will accept your experience?
- prirun 4y ago
  While young, workers can endure more hardship. When older, they have a lot invested in their job and changing may be difficult or impossible. Companies do not make it easy for workers to change their job, especially if the worker is already working full-time + on-call. There are only so many hours in a day. And sick days are not so much of a problem for the young, so in their twenties, workers are only looking at their paycheck. That changes when they're 60. IMO it's cruel and ridiculous to tell people they can only have sick days on certain days of the week. Whoever heard of that?

hedora 4y ago

“Increase in inefficiency” isn’t a useful metric. It’s not like Mr. Burns is going to have Smithers club a baby seal to death for each wasted dollar. Instead, the utilization rate dropping from 98% to 90% is less than a 10% increase in labor cost. These are capital intensive businesses, so labor is a small fraction of overall costs. Mulitplying out, it’s probably a 1% increase in business expenditures, that (if mandated industry wide) can be passed directly on to the customers.

wahern 4y ago
It's precisely because fixed costs are so high why the railroads are so intransigent, especially considering they've been captured by activist investors. High fixed costs raises the stakes for swings in variable costs. And labor accounts for ~40% of variable costs (circa 2009 per https://www.ndsu.edu/fileadmin/challeyinstitute/Research_Briefs/USDA_Report-Railroad_Rates.pdf https://www.ndsu.edu/fileadmin/challeyinstitute/Research_Bri...) (I can't find numbers for variable or fixed costs as percentage of total operating costs, but it seems fixed costs are definitely >50%, especially since deregulation.) The import is that the railroads will likely need to be forced to provide sick days. Both because management and investors are so sensitive to variable costs, but also because there's a collective action problem--any one railroad doing this immediately puts them at disadvantage to the others in terms of stock prices. But just as you say, any mandate is unlikely to result in significant real costs to customers. Alternatively, maybe a Musk-like industrialist could swoop in with ideas on how to reduce fixed costs, shifting emphasis. But that seems unlikely. The whole industry seems to be completely geared toward extracting as much value as possible without investing capital.

legitster 4y ago

Is there a particular reason they can't keep on-call standby workers? At least in their major hubs?

duskwuff 4y ago
Because that would mean they'd have to hire, train, and pay more employees.

Lammy 4y ago

> employ only barely enough employees to keep the network operating For context, US railroads collectively employ ~150000 people, down from "peak railroad job" of ~2.2 million people in 1920: https://data.bls.gov/timeseries/CES4348200001?amp%25253bdata_tool=XGtable&output_view=data&include_graphs=true https://data.bls.gov/timeseries/CES4348200001?amp%25253bdata...

specialist 4y ago

As you know, there's a tension between profit and resilience. Resilience requires slack, which reduces profits. We regulate bank reserve ratios. A burden imposed onto each org in order to keep the whole system humming along. Labor should be treated the same way. Perhaps thru regulating utilization rates, by sector.