Imagine your urgently needed raw materials stranded on a freight train thousands of miles away—not due to severe weather or infrastructure failure, but because the railroad company lacks sufficient personnel to dispatch trains on schedule. This isn't some dystopian prophecy but the harsh reality facing America's freight rail industry.
Surface Transportation Board (STB) Chairman Martin Oberman delivered a scathing speech at the recent RailTrends conference, dissecting the sector's systemic failures with unsparing precision. His remarks targeted industry giants' short-sighted workforce reductions—driven by profit maximization—that have precipitated service breakdowns and pose grave threats to the U.S. economy.
STB Chairman's Diagnosis: Confronting Freight Rail's Failures
Oberman framed his critique around a central question: Why has America's economic lifeline—its freight rail network—descended into service quality deterioration? He characterized 2022 as "a challenging year" for STB, grappling with both the Canadian Pacific-Kansas City Southern merger and what he termed "service collapses" among Class I railroads.
The chairman singled out the "Big Four"—Union Pacific, BNSF, CSX, and Norfolk Southern—as primary culprits. Emphasizing railroads' unique economic importance, Oberman cited an Association of American Railroads (AAR) September 2021 report detailing the sector's role in transporting critical commodities. He stressed that these effectively monopolistic/oligopolistic operators require rigorous oversight to ensure public—not just shareholder—interests are served.
Labor Shortages: A "Self-Imposed Blockade"?
Against mounting labor tensions, Oberman contended railroads are experiencing a "partial blockade" of their own making. Since March 2020, carriers collectively slashed 10% of their workforce—with pre-pandemic cuts (2016-2020) already eliminating 29,000 jobs (18% of employees). This eviscerated operational resilience, leaving no buffer for disruptions.
When railroads blamed pandemic-era labor shortages, Oberman countered that unlike prudent manufacturers (who retained staff despite temporary profit impacts), profitable railroads chose aggressive cuts—continuing reductions even during 2021-2022's demand recovery. By 2022's first quarter, service had "fallen off a cliff," with crew shortages causing unprecedented train idling.
"What's the difference between a train that can't move because the railroad hasn't hired enough crews versus one halted by strikes? More disturbingly, embargoes—once reserved for natural disasters—are now routine operational tools."
Embargo data reveals alarming trends: 140 incidents in 2017 ballooned to 631 by 2019 (350% increase), with 1,115 recorded through September 2022. Over 80% stem from "congestion"—a euphemism for inadequate crews. Each embargo means sudden, prolonged service denials for clients, crippling industries dependent on reliable rail transport.
Economic Toll: The Hidden Costs of "Phantom Strikes"
AAR estimates a full rail shutdown would cost $2 billion daily. Oberman calculated that 10% workforce reductions over 2.5 years depressed productivity by 12.9% (2021) and 15% (2022)—translating to ~$3 billion daily in lost economic activity ($880 billion and $1.09 trillion annually). Even halving these figures reveals staggering damage.
The chairman dismantled carriers' claims about embracing growth, noting employment kept declining until STB's May 2022 emergency orders compelled hiring plans. He highlighted that while railroads saved $4.8 billion in wages, they distributed nearly $60 billion to shareholders via buybacks/dividends—12 times labor savings.
"Couldn't these highly profitable railroads afford to retain 13,000 workers to support economic recovery? Their $4.8 billion wage savings are dwarfed by $550 billion returned to shareholders—all to satisfy operating ratios."
Reckoning Ahead: Charting Rail's Future
Oberman's critique transcended immediate issues, demanding fundamental reassessment of railroads' economic role. He urged abandoning short-term profit fixation to address labor shortages and restore service quality—essential for sustaining national prosperity.
The speech also signaled intensified STB oversight, warning that carriers face stricter scrutiny to align operations with public interest. At this crossroads, the industry's trajectory hinges on whether railroads can recalibrate strategies—and whether regulators can enforce accountability.