Revisiting the Railway Labor Act

Review of
The Railway Labor Act & the Dilemma of Labor Relations

by Frank N. Wilner
(Simmons-Boardman Books Inc., 1991), pp. 118

Reviewed by William D. McLean

William D. McLean is a retired railroad officer living in Rockville, Maryland.

Since its enactment in 1926 the Railway Labor Act has been the legislative bedrock of labor relations law in the railroad industry. Much has been written about its alleged shortcomings. (See, for example, "At Age 65, Retire the Railway Labor Act," Regulation, Summer 1991.) The act has been blamed for excessive wage rates, archaic and wasteful work rules, interminable delays in the settlement of labor disputes, and secondary boycotts that permit essentially local disputes to grow into nationwide strikes. Frank N. Wilner, an assistant vice president of the Association of American Railroads, has now made a convincing and well-documented case that for the most part this is simply not so.

By way of background to his arguments in support of the Railway Labor Act (with some modifications), Wilner traces the course of labor relations in the railroad industry from the earliest hint of significant controversy to the present time. Insofar as it bears on his central theme, he has traced the course of labor relations in other industries as well. That is all done in concise and readable fashion and gives the reader a clear picture of the rise of railroad labor from a condition of near serfdom to a position of extraordinary power. He details the early steps to organize fraternal brotherhoods along craft lines. As those new labor organizations became more strident in their demands for higher wages and better working conditions for their members, the railroads turned to the federal courts for injunctions against strikes and violence. Passage of the Sherman Act in 1890 served what was surely an unintended purpose when the courts interpreted it to outlaw union organizations as unlawful combinations in restraint of trade. At the same, however, public opinion was gradually shifting to a position of support for organized labor. Passage of the Clayton Act in 1914 seemed to open a new avenue for the union movement in that it specifically provided that labor organizations did not constitute unlawful combinations in restraint of trade. The courts held, however, that this exemption did not extend to permit otherwise unlawful actions such as impeding the flow of interstate commerce by strikes.

World War I brought federal control of the railroads and with it a surge in rail union power. During the twenty-six-month seizure, the director general and the various boards created to implement that seizure doubled union wages, permitted an unimpeded surge in union membership, and imposed costly work rules that at least in part continue in effect today.

Paralleling the history of growth in rail union membership and power is a history of congressional attempts to ensure labor peace in the rail industry and thus prevent disruptive and costly strikes. From the Arbitration Act of 1888 through the Erdman Act of 1898, the Newlands Act of 1913, the Adamson Act of 1916, and title III of the Transportation Act of 1920, nothing seemed to work. At least in part this was so because it was "cram down" legislation without the joint endorsement of management and labor. Also the Sherman Act, and to a lesser extent the commerce clause of the Constitution, were still available to enjoin strikes when they threatened serious disruptions in the economy.

Having traced those parallel trails of the growth in union strength and the unsuccessful efforts of Congress to legislate labor peace in the rail industry, the author brings the reader to the political and economic environment of 1926, when, at the urging of President Coolidge, Congress enacted the Railway Labor Act. Parenthetically it should be noted that when federal control ended in 1920, the unions made a strong effort to get Congress to nationalize the railroads. Fortunately, the vast army of rail shippers exceeded even the rail unions in legislative potency, and the proposal failed. If it had succeeded, there would have been no need for the Railway Labor Act. Railroads, instead of being labor ridden (at least in part), would have soon been completely labor controlled.

Although amended in some respects since its original enactment, the substance of the Railway Labor Act still stands today--sixty-six years after its enactment. Why has it survived all these years when its predecessors each died at an early age? Wilner suggests a couple of reasons. One is that the legislation did not mark any radical departure from earlier statutes. Instead, it incorporated the best, or at least the most workable, provisions of earlier laws. Second, the terms of the legislation were agreed to by management and labor before enactment, or so it would seem from the laudatory statements emanating from both sides following enactment. Considering the new political power of the unions at the time and the less than overwhelming economic and political strength of the carriers, it seems likely that the agreement was sort of one-sided, but at least there was agreement.

Maybe the best reason of all that the Railway Labor Act has survived all these years is that it works--at least in the sense of preventing widespread strikes with disastrous economic consequences. It is true that on many occasions Congress has had to intervene to prevent strikes, when, after all of the negotiation and mediation machinery of the act had been exhausted, there was still no accord. Regrettable as it may be to have Congress intervene in the collective bargaining process, it is still better to have such intervention occur on an informed basis with the benefit of considered and objective evaluations by the National Mediation Board and Emergency Boards appointed by the president (both being provided for by the Railway Labor Act) than it would be to have Congress flying off on a course determined solely by political expediency.

In short order Wilner disposes of the arguments most frequently advanced in support of repeal. As to high wage rates, he points out that the railroad industry is not alone in bearing this cross. Furthermore, for many years the carriers had only to apply to the Interstate Commerce Commission for rate relief to enable them to recover wage increases. (Of course, that is no longer true, but before the days of intense truck and barge competition it was almost automatic for rail carriers to pass on the cost of increased labor costs to the public with the assistance of the Interstate Commerce Commission.) As to costly work rules, many of these were imposed by state law (for example, full crew laws that at one time were in effect in more than twenty states), and many originated during the World War I period of federal control. The Railway Labor Act is in no way responsible for those work rules. On the contrary, it has provided the framework for negotiation in recent years that has led to the revision and repeal of many of those rules. Complaints about a multitude of unions' making bargaining more difficult also miss the mark when directed at the Railway Labor Act. Traditionally, rail labor organized along craft lines rather than industry lines, and the act simply recognized that established fact. (Remember, the act represented "agreement" between the two sides.) Finally, as to the argument that the act actually promotes delays in the settlement of labor disputes, the author points out that there is nothing in the law that requires delay in the settlement of disputes. In fact, some disputes in the past have been settled as quickly as any dispute governed by the National Labor Relations Act. The Railway Labor Act does, however, permit delays in settlement, and the fact that the National Mediation Board can impose such delays by simply failing to act has frequently served a useful purpose.

Although Wilner has cogent reasons to support his belief that the act should not be repealed, he recognizes that certain improvements are in order. The most important is to amend the act to prohibit secondary boycotts and thus bring restraints on rail labor in line with those imposed on labor organizations in other industries that are subject to the National Labor Relations Act. It should be noted that he offers no opinion on whether such an amendment is possible. Sharp declines in railroad employment in recent years have reduced the political power of rail unions, but they are still a force to be reckoned with on Capitol Hill.

Other suggestions Wilner offers for improvement in the act include lengthening the term of National Mediation Board members beyond the present three years and setting minimum standards for board members to ensure their expertise in matters they are called on to consider.

Finally, he suggests that the board itself should act to reduce the number of bargaining units, which have multiplied in recent years as a result of rail mergers. Giant rail systems such as Burlington Northern, CSX, and Norfolk Southern now have to deal with multiple general chairmen in each craft because of their continued representation of these crafts on the constituent carriers.

More or less as an aside, Wilner suggests that if the president and Congress would exercise more restraint in injecting themselves into the collective bargaining process each time an "insoluble" labor dispute developed, the parties in their own self-interest might find that the "insoluble dispute" was solvable after all. Maybe so, but despite the fact that the railroads now handle less than 40 percent of intercity freight traffic, there are still many giant shoppers who would suffer irreparable loss from a national rail strike of any duration. It is a safe bet that they would be on the doorsteps of the White House and Congress long before the insoluble dispute became solvable, and the president and Congress would intervene as usual.

One final subject addressed by Wilner has nothing to do with the Railway Labor Act--or at least no one suspected that it did for over fifty years. The subject is income protection for rail workers who are dismissed or demoted as the result of a merger, sale, abandonment, or exercise of trackage rights involving a line of railroad. Beginning in 1933, a pattern evolved through legislation, court and administrative decisions, and agreement of the parties whereby displaced employees were assured continuing income for a prescribed period. Changing economic conditions and a consequent decline in union power have brought changes to that pattern in the past few years, however. And in certain types of transactions (such as the sale of a railroad or a part of a railroad to a noncarrier), the courts have held that statutory protective conditions now found in the Interstate Commerce Act do not apply. As a result, beginning in 1986 the unions took the position that any proposed sale that would affect employees constituted a change in working conditions that would require notice and bargaining under the Railway Labor Act, which, of course, would mean that the transaction would never take place. This was a novel approach, and in a way it was at least indirectly successful. While the principal contention of the unions was rejected by the courts, it was rejected in the context of the right to strike. A federal circuit court of appeals has now held that such disputes are "minor" under the act and, therefore, must be submitted to an adjustment board for arbitration. Presumably, a carrier faced with that prospect would prefer the certainty of negotiated settlement over the uncertainty of an arbitration award.

Wilner has performed a real service in writing this book. Management, labor, rail analysts, and students can develop an understanding of railroad labor problems in these 118 pages that they could never find elsewhere without many months of study. At the same time, they can take pleasure in reading a well-written and enjoyable book.

Assessing the Cost of Greenhouse Abatement

Review of
Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits
by Alan S. Manne and Richard G. Richels

Reviewed by Ray Squitieri

Ray Squitieri is a senior staff economist at the Council of Economic Advisers.

Some say the world will end in fire. Some say in ice. Fifteen years ago the vote was ice. These days it is fire. Thousands of natural scientists are now sifting the data in an attempt to decide. The United States alone will spend $1.4 billion in 1993 on global climate research. Yet, thus far, on a topic that cries out for clear economic thinking, only a few economists have published serious research. Among those, Alan Manne of Stanford University and Richard Richels of the Electric Power Research Institute are two of the most prominent. Buying Greenhouse Insurance, which collects articles originally published elsewhere, concludes that world economies would pay dearly for deep cuts in carbon dioxide emissions, but leaves open the possibility that such actions may make sense as insurance.

The book is timely. In early 1992 the European Community challenged the United States to commit to stabilize carbon dioxide emissions at 1990 levels. The United States has so far declined to do so, but the issue will dominate the environmental debate throughout the 1990s.

In the policy debate to date proponents of immediate action ("Ready, fire, aim!") argue that the stakes are so high that immediate action is justified, even in the face of considerable scientific uncertainty about the likelihood, timing, and effects of global warming. They point to risks of irreversible damage and claim that low-cost alternatives to fossil fuels are already on the shelf. The opposition ("Ready, aim, aim!") urges caution. First, they argue that global warming itself may not arrive; second, that humans could readily adapt to warming; third, that the costs of abatement are likely to be large; and fourth, that the cost of waiting a decade or so before committing to costly actions is small. Economists have so far concerned themselves with the third and fourth issues. Their research has generally vindicated the wait-and-see approach.

Recent research has concluded that uniform national emissions targets do not make economic sense because of the wide divergence in control costs across countries. More efficient schemes such as tradeable permits or a uniform tax could cut costs by half. In addition, research has shown that treaties should not focus on fuel-burning carbon dioxide emissions alone. Tree planting and methane control will be cheaper in some places, at least up to a point. Economists have also found that no agreement will work without cooperation by the less developed countries, which are expected to be the main emitters within a few decades.

In the brave new world of computer modeling, researchers represent the United States or the world economy in a set of equations. Manne and Richels, along with most of their brethren, built their model, Global 2100, to answer the question, "What would be the costs of limits on carbon dioxide emissions from fuel burning?" Global 2100 is based on Manne's well-respected work from the "energy crisis" days of the mid-1970s. Like a dozen other research groups worldwide, Manne and Richels consider only the costs, not the benefits, of slowing warming; and they consider only the costs of restricting carbon dioxide emissions from fossil fuel burning while they omit the costs of reducing methane from livestock and landfills or expanding forests and other carbon sinks.

Even after those simplifications, greenhouse abatement presents the modeler with a series of nasty complications: a very long time horizon (Manne and Richels run theirs out to the year 2100; William Cline runs his to 2300); large uncertainties about population and economic growth, energy demand, and technical innovation; an irreducibly global problem (trade flows are crucial); the possibility of irreversible damages or severe limits on economic growth. Noting the evident difficulty of predicting GNP growth or interest rates even one or two years in advance, skeptics have challenged the whole concept of hundred-year models.

Computer models addressing global warming fall into two categories. Optimal planning models such as Brookhaven National Laboratory's MARKAL focus on specific technologies and generally conclude that many low-cost alternatives could reduce carbon dioxide emissions. Most economists believe that the optimal planning approach understates the costs of new technologies and overstates their impacts. Econometric models, such as that of Dale Jorgenson and Peter Wilcoxen, which is built around statistical relationships found in historical data, have generally concluded that policies to limit carbon dioxide emissions involve significant costs. Manne and Richels' Global 2100 lies closer to the optimal planning camp, although its conclusion--that carbon dioxide restrictions would involve significant costs--puts it closer to the econometric camp.

Effective computer modeling is a balancing act in which sectoral detail, consistency with economic theory, and transparency must each appear in the right proportions. While none of today's models fully meets all those requirements, Global 2100 comes close. It expands the optimal planning design to link five regional models, representing the entire world. It contains the most satisfying treatment of the energy sector and the clearest simple treatment of feedback to economywide output. And it is transparent, at least in comparison with large, "black box" econometric models.

Of course, Global 2100 does have its limitations. Assessing impacts on different industries would require a model with more sectoral detail, such as that developed by Jorgenson and Wilcoxen. Identifying short-run costs of adjustment would require a short-run macro model, such as that of Data Resources Incorporated. Single-country detail requires a single-country model, such as the handful of U.S.-only models. Comparing long-run effects of different carbon tax regimes may require a computable general equilibrium model such as Lawrence Goulder's. Further, despite its name, Global 2100 is global only in a limited sense: its five world regions trade nothing except oil and carbon emissions permits.

Those limitations aside, Manne and Richels offer valuable insights on the costs of limiting carbon dioxide emissions. Reducing U.S. carbon dioxide emissions from fuel use by 20 percent from 1990 levels would cost about 2.5 percent of U.S. GNP by 2030. (For comparison, the average recession reduces long-run U.S. GNP by about 1 percent). The 20 percent cut would cost 1 to 2 percent of GNP in the rest of the Organization for Economic Cooperation and Development, which has a less carbon-intensive economy, and 3 percent in the more carbon-intensive economies of the former Eastern bloc and Soviet Union. China, with the most coal and the most ambitious economic growth targets, would face a crushing cost of 5 percent of GNP by 2100. Hardly anyone thinks China will sign on to policies that wipe out its future GNP growth. And if China and other developing countries do not sign a worldwide agreement, economic growth will drive up their carbon dioxide emissions enough to swamp emissions cuts made by the rich countries. (Manne and Richels expect worldwide GNP to grow by a factor of five over the next century.) Jae Edmonds and Richard Barnes have calculated that without cooperation by the less-developed countries, the world could not achieve a 20 percent cut in carbon dioxide emissions by 2020, even if the OECD eliminated carbon dioxide emissions entirely.

Manne and Richels make another important contribution when they frame the question of greenhouse abatement as one of decisionmaking under uncertainty. With the large gaps in current scientific knowledge, many have urged early action to slash carbon dioxide emissions, as a kind of insurance against possible catastrophe. But as the authors demonstrate, an aggressive research program could provide its own greenhouse insurance by answering the question, "Is a catastrophe possible?" in time to take action. With an aggressive research program in place, waiting a decade or so before making costly commitments becomes an attractive alternative.

Some researchers have criticized Manne and Richels as too pessimistic on the costs of reductions. Princeton's Robert Williams, for example, asserts that Manne and Richels' work significantly overstates the costs of new, less carbon-intensive technologies. When Stanford's Energy Modeling Forum compared the results of a dozen related models, all run on a consistent set of assumptions, Global 2100 appeared at the high end of the range.

On the other hand, Manne and Richels neglect certain factors that would make control costs even higher. For example, Global 2100 implicitly assumes the most efficient control policies. Further, Harvard's William Hogan and Dale Jorgenson believe that Global 2100 omits an important indirect cost. They find evidence from the past several decades that productivity growth is associated with increasing energy intensity, and thus that restrictions on carbon dioxide emissions, by reducing energy use, would depress total factor productivity (the measure of output divided by all inputs taken together), and thus economic growth.

Over the next decade three questions will dominate the policy debates: How far should we go in curbing greenhouse emissions? What will be counted? And how are the costs to be shared? Manne and Richels and their colleagues have already taken important steps toward answering those questions. Policymakers should take heed.

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