How the railroad strike affect the logistics business in the future?

The railroad union strike began in 1992 and occurred in the entire state except the east. The white House said it cost the economy $1 billion a day in 1992- $2.1 billion in today’s value. Freight transportation and all businesses that used the railway were shut down so, resulting in huge losses.

 

The terrible nightmare of those days is coming. The railroad union strike, which emerged in September, recommended that trains typically run under the Railroad Labor Law. However, The Brotherhood of Railroad Signalmen rejected a labor deal between the union, freight rail companies, and the government because the fundamental right to sick days was not guaranteed. BRS president Michael Baldwin stated, “The NCCC and PEB also failed to recognize the safety-sensitive and highly stressful job.” As a result, the union can go on strike as early as November 19th. If this strike starts, it will be caused losses of $200,000 per day. Inflation is expected to intensify if the railroad union strike goes ahead in November. As a result, the costs of selling products increase, forcing companies to set high prices. It is called ‘cost-push inflation. In August, the Biden government’s inflation Reduction Act went into effect to curb growing inflation.

 

The Inflation Reduction Act focuses on increasing electric vehicle dissemination to react to weather change and inflation. It can receive subsidies for only electric vehicles made with more than 40% of battery core minerals from the United States or countries that have signed FTAs. This news will be possible to revitalize the US domestic economy as automobile manufacturing plants in the US are renewed. More than 90% of battery core minerals are imported from China. The cost of vehicles recently jumped all over the world due to COVID-19. In 2021, the production of Chinese manufacturing plants was stopped, logistics chaos occurred, and inflation began to rise. To prevent this issue, the Biden government submitted the act to reduce dependence on foreign countries and revitalize the US economy through The Inflation Reduction Act.

            The Inflation Reduction Act won’t help us immediately if the railroad union strike goes ahead. However, the Inflation Reduction Act would be a significant first step toward revitalizing the economy. From a long-term perspective, implementing the Inflation Reduction Act is expected to reduce the fiscal deficit in the future. This should induce an increase in supply and a decrease in demand to resolve inflation. Reducing the budgetary deficit reduces the money supply and demand in the economy. This is because it can have the effect of suppressing inflation in the end. In addition, increasing government spending, such as medical and energy costs, is expected to ease the burden of inflation on households.

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References

Lori Ann LaRocco. (2022). Renewed threat of rail strike has supply chain managers ramping up contingency plans. CNBC. https://www.cnbc.com/2022/10/20/threat-of-rail-strike-has-supply-chain-ramping-up-contingency-plans.html

Lori Ann LaRocco. (2022). A second railroad union votes down labor deal needed to avoid nationwide strike. CNBC. https://www.cnbc.com/2022/10/26/second-railroad-union-votes-down-deal-needed-to-avert-strike.html

Eleanor Mueller and Tanya Snyder (2022). Second rail union rejects deal, raising strike threat anew.CNBC.https://www.politico.com/news/2022/10/26/rail-strike-threat-emerges-again-00063610

Gillian Brockell. (2022). From an 8-hour workday to Labor Day: Rail strikes that changed America. The Washington Post. https://www.washingtonpost.com/business/interactive/2022/rail-strikes-history-1877-2022/

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