Imagine the catastrophic consequences if the U.S. rail system—the backbone of the nation's economy—were paralyzed by human decisions rather than natural disasters. This isn't alarmist speculation but a dire warning from Martin Oberman, chairman of the Surface Transportation Board (STB), delivered at the recent RailTrends conference. He bluntly accused four major railroad companies—Union Pacific, BNSF, CSX, and NS—of creating a severe service crisis through "self-inflicted" mass layoffs designed to boost short-term profits.
A "Service Meltdown" Years in the Making
Chairman Oberman described 2022 as "a challenging year" for the STB, grappling not only with the Canadian Pacific-Kansas City Southern merger but also with what he called a "service meltdown" among the four major railroads. He emphasized this crisis wasn't sudden but had been brewing since before the pandemic, finally erupting this year with no effective resolution in sight.
Notably, Oberman singled out these four companies as the primary culprits, while noting other rail operators maintained normal service levels.
The Economic Lifeline at Risk
Citing a September 2021 report from the Association of American Railroads (AAR), Oberman underscored rail's indispensable role in the U.S. economy. The report detailed how railroads transport critical commodities that sustain economic activity. "If railroads are as essential as AAR claims," Oberman stated, "their failure to operate at full capacity is making us all pay the price."
He explained the STB's regulatory role stems from the railroads' de facto monopolies: "Without oversight, monopolies prioritize their interests over the public good. Our job is to protect that public interest."
The Self-Imposed "Partial Shutdown"
In a striking accusation amid tense labor negotiations, Oberman asserted the industry is suffering a "partial shutdown"—one orchestrated by the railroads themselves. Since March 2020, major carriers collectively slashed 10% of their workforce, exacerbating economic damage.
Even before COVID-19, from January 2016 to February 2020, Class I railroads had already cut 29,000 jobs (18% of their workforce), dropping from 156,000 to 127,000 employees.
"These cuts eliminated their operational buffer," Oberman criticized. "When railroads blame pandemic labor shortages for their failures, they ignore two facts: First, other industries didn't cut 20% of staff pre-pandemic. Second, sectors like agriculture, chemicals, and food processing retained workers to meet rebounding demand—even at temporary profit loss."
He contrasted this with railroads' approach: "Highly profitable, they made the opposite choice—whittling down an already depleted workforce, damaging the entire national network."
Deepening Cuts, Worsening Crisis
From March to August 2020, Oberman noted, Class I railroads eliminated another 10,000 jobs (reaching 117,000 employees—below current levels). "The bleeding continued," he said. "Despite economic recovery and rising freight demand, railroads kept losing workers—3,270 more by late 2021, then another 13,000 (10%) over the next 21 months. By mid-2021, service quality and volume were collapsing, with performance plunging in Q4 2021 and Q1 2022."
These issues dominated STB's April 2022 hearings. Oberman stated unequivocally that service failures resulted from deliberate workforce reductions: "Shippers, labor representatives, and even railroad executives testified that crew shortages, worker attrition, and hiring difficulties caused this crisis. Rail-dependent customers feel this labor drain daily."
Stranded Trains: The Human Cost
Oberman revealed that crew shortages left more trains idle this year than in recent memory. "What's the difference between trains halted due to understaffing versus strikes?" he challenged. "The outcome is identical."
More troublingly, embargoes—traditionally reserved for natural disasters—have become routine operational tools. In 2017, Class I railroads issued 140 embargoes network-wide. By 2019, this surged 350% to 631. As of September 2022, the count reached 1,115 and climbing.
"Over 80% cite 'congestion'—a euphemism for having too few crews to move trains," Oberman said. "Each embargo means customers get barely any notice that service will halt for days, often a week or longer. Industries relying on regular, reliable rail service can't function this way. Using embargoes as standard practice fundamentally violates carriers' common obligations."
The $100 Billion Toll
AAR estimates a full rail shutdown would cost the U.S. economy $2 billion daily. Oberman calculated that the 10% operational reduction over 2.5 years represents massive lost productivity: "In 2021-2022, rail output fell 12.9% and 15% below expected trends—translating to roughly $3 billion in daily lost activity. That's $880 billion last year and $1.09 trillion this year. Halve those figures, and the damage remains catastrophic."
Despite railroad executives claiming they'd "gotten the message" about needing growth, Oberman countered: "After last year's conference, did hiring improve? No—service deteriorated so badly we had to convene emergency hearings. Only after our May order requiring recovery plans and hiring reports did employment numbers show real change. Even then, railroads complained about hiring difficulties while pledging to recruit."
Short-Term Gains, Long-Term Damage
Oberman questioned why railroads, unlike other industries, didn't retain workers during the pandemic. Addressing rail CEOs (some present at RailTrends), he asked: "What did these shortsighted COVID layoffs actually save?"
"Class I railroads saved $4.8 billion in wages over 2.5 years," he noted. "But could they afford to keep those 13,000 workers to support economic recovery? During that same period, they returned nearly $60 billion to shareholders via stock buybacks and dividends—12 times the wage savings. Would shareholders have revolted at 'only' $55 billion? Hardly. That $4.8 billion saved is a rounding error compared to operating ratios."
Oberman's remarks serve as a stark indictment of an industry that prioritized quarterly profits over systemic resilience. As railroads navigate this self-inflicted crisis, fundamental questions remain about balancing shareholder demands with national economic needs—and whether regulatory intervention can restore this vital infrastructure to health.