Prices May Still Skyrocket Even With Railroad Strike Likely Averted

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Inflation continues to be a significant problem for America. As consumer prices rise, it’s taken a chunk out of the middle and lower-classes purchasing power. On top of it, the Federal Reserve is increasing interest rates, making it more expensive to use credit cards or purchase a vehicle or home. Up until late Wednesday, September 14, a massive emerging threat loomed over the fragile US economy.

For weeks, labor unions at the largest railroad companies in the nation refused to accept a tentative collective bargaining agreement. The threat of 116,000 rail workers going on strike could have massive consequences for the country. Fortunately, on Thursday morning, the White House announced rail freight companies and some worker unions had agreed to a tentative labor agreement. The question becomes, will the proposed deal still increase prices for everyday Americans?

If Trains Stop Moving, the Consequences Would Be Unthinkable

In September and October 2021, Americans discovered what things might look like when manufacturing and supply chains break. Coming out of the pandemic, trucking companies struggled to bring drivers back. Freight ships off the coastline could not dock and unload their cargo. Still, the railroads continued working to ensure supplies were available.

Supply chain problems still exist. Yet, imagine how bad things might get if the railways stopped operating. Trains move nearly 40% of all long-range freight, including everything from fossil fuels to pharmaceuticals, food, electronics, and more. Experts say any rail service break would worsen the supply chain crisis. According to the Association of American Railroads (AAR), the US economy would lose $2 billion a day if the railroads stopped working.

Farmers warned the government if they can’t move grain, they won’t have a way to store their upcoming crops, and much of it could spoil. That would cause food prices to rise even higher.

Perhaps the most intrusive impact on consumers would be with energy supply. Mining associations say there already aren’t enough trains to move coal extracted from the ground. That’s causing electricity prices to increase as producers pay more for the commodity due to lowering supplies with steady or growing demand.

Crisis Averted, But Supply Chain Is Still Vulnerable

On Wednesday, Labor Secretary Martin J. Walsh helped broker talks between the freight rail companies and unions. The Biden administration announced the deal that would increase pay, improve working conditions, and ensure stable health costs for workers. At the same time, the administration said businesses benefit by retaining and recruiting high-quality employees and serving as the backbone of the US economy.

The deal is not without cost, however, and will undoubtedly impact inflation as increased wage costs get passed on to shippers and, in turn, consumers. Energy costs, for example, will rise because the price of delivering coal to power plants will increase. So, strike or no strike, it looks like Americans will end up paying more for things that are important to them.

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