Railroad to Freedom
How would the union react to a pay cut? Or job cut?
I think greater efficiency in used of people and equipment is a more productive answer.
Short of blatant union-busting tactics, reducing labor expenses can be difficult at best. Unilateral wage reductions are out of the question and I'm not sure as to how many positions can be eliminated by automation and/or further mechanization.
That is exactly what Tom Downs attempted in 1997. Didn't work out too well for him.
Editor Emeritus, This Week at Amtrak
Unilateral (read: forced) renegotiation of contracts is a non-starter. However, if the wage scales are out of line with comparable situations, there could be some savings in the next contracts. Attrition as retirements occur is another possibility. But as others have pointed out, one reason Amtrak has such a high payroll is the labor-intensive nature of the LD trains, compared to the corridor routes.
C&NW, CA&E, MILW, CGW and IC fan
I honestly don't see there being an issue with labor being so much higher than all other expenses on the balance sheet. Compared to other passenger operations in this country, Amtrak's 50% labor to all other expenses is reasonable. Here is some quick research in to the labor expense ratios for some other passenger railroads in the US: New Jersey Transit 52%, SEPTA 59%.
All Amtrak and commuter trains have multiple conductors compared to freight trains which typically have 1 conductor. Amtrak long distance trains have additional crew members for handling food service and sleeping / coach car attendants. Unlike the airline and bus industries, Amtrak's payroll includes right-of-way (track/signal/structures) maintainers, engineering, police, dispatching, etc. For airlines, dispatching/air traffic control is covered by the FAA, airports are maintained and staffed by local governmental authorities, security is provided by the Feds (TSA).
So based on the above explanation, it makes sense labor would be such a big expense. If you really think about it, moving people is very labor intensive process. Think of how many people are involved in transporting people on an airplane or a ship (cruise or ferry) let alone a train (Amtrak or commuter). It a lot of people.
ontheBNSFUnder wages, salaries, and benefits it seems to make a very large expense. 2.0 billion or so seems to be going there. If that could be reduced with everybody taking a haircut and labor automated wherever then losses could be possibly ended. That seems to be where most Amtrak's subsidy is going.
Amtrak has a fair number of service personnel on its trains. We have discussed eliminating them but the elimination does not come from automation; it comes form eliminating the services they perform. For example, if Amtrak eliminates sleeping cars it can eliminate service attendants for sleeping cars. That would be a change of policy. So far Amtrak has declined to make that change of policy.
To simply reduce wages would not doubt injure morale. It would also do nothing to reduce the costs of operating crew dorms and of housing crew members between trains that run 3 days a week. Working on a train makes its own demands on people. Providing direct service to the public not only makes its own demands but also requires high moral. Crew members with low morale will not necessarily be rude or obnoxious; however they can generally drag their feet, be hard to find when they are needed and do a lot to erode the standard of service Amtrak needs to provide. Reducing wages could cause Amtrak some real problems.
Also, some here have pointed out that Amtrak is structured as a for profit corporation. In for profit corporations employees have a right to collective bargaining over wages. Any wage cut would have to be negotiated with unions who most likely would oppose it. Had Amtrak been structured as a part of government rather than a for profit corporation then there would be no right to collectively bargain over wages. Federal employees today are represented by unions but those unions cannot bargain over wages; wages are set by law. In recent times there have been years that Federal employee wages remained flat and were not increased. And of course now Federal employees face furloughs because of the sequester and will have their wages cut because of that. But the Congress declined to place such controls on Amtrak employees.
So cutting wages is not as simple as it may sound.
"Cost walks on two legs"
That´s a known fact for just about any type of industry you can think of, including AMTRAK. If you want to cut down on cost, you have to cut services, which will in return cut down ridership.
Most of the European state-owned railroads went down that route in the 1950´s up until the late 1960´s, which really did not solve the issue at all, as revenues declined faster that costs could come down. It was as late as the mid 80´s when they found out that improved services would take people back to riding trains. Improved services means improved comfort, on-board services and speed...
Sir Madog "Cost walks on two legs" That´s a known fact for just about any type of industry you can think of, including AMTRAK. If you want to cut down on cost, you have to cut services, which will in return cut down ridership. Most of the European state-owned railroads went down that route in the 1950´s up until the late 1960´s, which really did not solve the issue at all, as revenues declined faster that costs could come down. It was as late as the mid 80´s when they found out that improved services would take people back to riding trains. Improved services means improved comfort, on-board services and speed...
But why do Amtrak workers have to be paid 2.3 times that of European counterparts. Europe is just as well developed as us. Also Amtrak indirectly funds pensions "Today, the burden of nascent railroad worker pensions, including those of freight railroad workers, are financed by Amtrak, regardless of whether such workers were ever employed by Amtrak or worked in passenger railroad service. In effect, Amtrak subsidizes the pensions of thousands of railroad workers who would otherwise not receive any pension." Amtrak also has high regulatory costs yet they have high costs imposed upon them yet people criticize them for not making money when they are prevented from doing so.
ontheBNSF But why do Amtrak workers have to be paid 2.3 times that of European counterparts.
But why do Amtrak workers have to be paid 2.3 times that of European counterparts.
That´s a figure I cannot verify. It may be true, if you include low-wage countries like Romania, Bulgaria, Estonia, Lithuania, even Portugal, Spain, Czech Republic etc. into that calculation, but then you are not comparing like with like. Just an example:
An engineer´s base salary is to the tune of $ 4,000 a month in Germany - times 13 in a year, as he receives a 1 month´s salary as what we call "Christmas bonus" . Add to that the mandatory employer´s contribution to social security and health insurance and the total labor cost add up to $ 70,000 a year for this person.
I doubt that railway people in the US cost 2.3 times that much.
Sir Madog ontheBNSF But why do Amtrak workers have to be paid 2.3 times that of European counterparts. That´s a figure I cannot verify. It may be true, if you include low-wage countries like Romania, Bulgaria, Estonia, Lithuania, even Portugal, Spain, Czech Republic etc. into that calculation, but then you are not comparing like with like. Just an example: An engineer´s base salary is to the tune of $ 4,000 a month in Germany - times 13 in a year, as he receives a 1 month´s salary as what we call "Christmas bonus" . Add to that the mandatory employer´s contribution to social security and health insurance and the total labor cost add up to $ 70,000 a year for this person. I doubt that railway people in the US cost 2.3 times that much.
here is where I got my figures from Amtrak, Office of Inspector General, "Comparison of Amtrak Infrastructure Labor Costs to European Railroad Averages," Evaluation Report E-09-01, March 24, 2009, p. 2.
http://www.amtrakoig.gov/sites/default/files/reports/LaborCostandEfficiencyReportE-09-01.pdf
On,
Where are you getting your claptrap about pensions? ATK is a railroad so it pays into Railroad Retirement and its employees draw Railroad Retirement when they retire, as do all qualified railroad employees. Like Social Security RR is a transfer program. Those who are working pay those who are not. Once taxes are paid in they loose their identity and get paid out. This is true of all participants and all employers. If ATK goes away, ATK pensions will be paid by freight railroad employees.
Mac McCulloch
The report concerns "infrastructure workers" not operations employees, such as engineers and crew.
Much of the difference is because of the higher costs of Amtrak benefits. When you look at base salary it varies with Amtrak being at times more and at times less than other countries.
The big benefit cost driver is health insurance. American health insurance costs much, much, much more than health insurance in any western nation. For example, Canada pays about 20 per cent as much as we do for a health insurance system that covers all Canadians. We Americans have massive inefficiencies in our system that has nothing to do with Amtrak or railroads; it is the same for all Americans. Finally, when the study looks at health costs it includes the money that Amtrak employees pay themselves for their health insurance. Since the study claims to be about costs to Amtrak for employees when it includes costs the employees themselves pay it is hard to see how the study is valid.
Amtrak's problem isn't the pay rate or benefits per employee....it's how many of them they have and what they produce!
I stayed at a hotel near O'hare last week. Lots of cool early aviation pix all around the place. One shows a smiling crew walking arm and arm away from their DC-6. There were NINE of them. How many now on a 100 seat jet? Four, maybe? Magic?
How many on the Crescent in 1970? How many now? Where would you like me to start?
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
oltmanndHow many on the Crescent in 1970? How many now? Where would you like me to start?
Or, perhaps more pointedly to the critics, "how many could you cut before the service began to degrade to bus-like do-it-yourself levels?
PNWRMNM On, Where are you getting your claptrap about pensions? ATK is a railroad so it pays into Railroad Retirement and its employees draw Railroad Retirement when they retire, as do all qualified railroad employees. Like Social Security RR is a transfer program. Those who are working pay those who are not. Once taxes are paid in they loose their identity and get paid out. This is true of all participants and all employers. If ATK goes away, ATK pensions will be paid by freight railroad employees. Mac McCulloch
Yes. There are 158,000+ RR employees at the Class 1s. Amtrak has about >20,000 of them. FIgure at least 1/3 would continue on paying RR retirement for whoever would run the NEC trains (they are not going away - Amtrak or not). Not negligible, but not a deal breaker, either.
Overmod oltmanndHow many on the Crescent in 1970? How many now? Where would you like me to start? Or, perhaps more pointedly to the critics, "how many could you cut before the service began to degrade to bus-like do-it-yourself levels?
How many on Acela?
Re: Railroad Pensions.
A Railroad Pension has two parts called Tier I and Tier II.
Tier I is similar to a Security benefit and includes all earnings whether or not from one or more railroads. However, there are no benefits for disabled children of retired or disabled railroad workers as there are for retired or disabled people who collect social security.
Tier II is a pension over and above Social Security and is based on railroad work.
To get a Railroad Pension a person must have 120 months of work (10 years) for the railroad and be at least 62. If you have 360 months of work (30 years) you need to be 60 years old. If you have fewer than 120 months of work for the railroad your railroad earnings will be included in a Social Security Benefit.
John WRTier I is in fact a Social Security benefit and includes all earnings whether or not from one or more railroads.
Tier II is really a "defined benefits plan in drag", sort of. You and the RR pay money into a fund and pensions are paid out. The IRS counts this like a regular retirement annuity.
If one manages 30 years of service by age 60 AND they are still working for a RR at that time, they can retire at 60 and collect a full share of Tier I and Tier II. If you leave the RR before age 60 and take another job that is covered by SSI, then SSI rules apply.
oltmanndThey are separate, but equal. Sort of.
You are right with an emphasis on the "sort of," Don. I looked at the Railroad Retirement Board website and learned that while a Tier I railroad benefit is similar to Social Security there are some differences. And yes, if at 60 you have 30 years of railroad work and a current connection to the railroad you can retire instead of waiting until age 62 + 1 month. That is a real advantage.
IRS will certain levy income taxes on both Tier I and Tier II benefits. I hope that, as with Social Security, only 85 per cent of the Tier I benefit is subject to income tax.
John
I remember flying PanAm and really enjoying the experience. Their stewardesses were cheerful, helpful and plentiful. Today you can fly cross country or on an inter-continental flight and the attendants have been reduced to basically meal servers and buspersons. (Some are even cabin cleaners between flights. In 1975 we paid $1,000 R/T to fly to England from SF. Today we can still do that. How did they cut the price? By cutting the service. Instead, let us let fares rise a bit to reinstate the service end of the travel business. A nice dining car experience on a 3 to 8 hour journey will keep them coming back. A cheap sack lunch? Not so much.
John WR IRS will certain levy income taxes on both Tier I and Tier II benefits. I hope that, as with Social Security, only 85 per cent of the Tier I benefit is subject to income tax.
A bit more complicated than that:
http://www.irs.gov/pub/irs-pdf/p915.pdf
Amtrak could reduce labor costs in the shop and eliminate Assistant Conductors and Coach Attendants by automating doors and making ticket collecting self-service while conductors pass out pillows, however this would still not make a great difference, as most of Amtrak's labor is in the category of "overhead." Management and marketing and so on, as well as stations.
conductorchris Amtrak could reduce labor costs in the shop and eliminate Assistant Conductors and Coach Attendants by automating doors and making ticket collecting self-service while conductors pass out pillows, however this would still not make a great difference, as most of Amtrak's labor is in the category of "overhead." Management and marketing and so on, as well as stations.
I'm sure it's "Both/And"...
Some serious benchmarking would be a good start.
dmikeeInstead, let us let fares rise a bit to reinstate the service end of the travel business
Let us not "reinstate" anything. Let's figure out the best way to do it now. How about contracting the whole shebang out to Darden. Let them load meals cooked at their nearby kitchens. Serve people at their seats. Provide lots of alternate seating arrangements ala the ICE/IC trains in Germany.
"There is a Bordbistro and/or Bordrestaurant on all ICE trains. Depending on the time of the day, you can choose from various breakfast menus to suit any taste or from à la carte main dishes. In addition to the standard dishes, the menu often features German and European regional specialities. The Bordbistro serves snacks and a wide selection of beverages which you can consume there or take back to your seat. In 1st class coaches a selection of beverages and meals from our menus can be served at your seat on request. Snacks and beverages are also available at your seat in 2nd class."
'Most all IC or EC trainshave a Bordrestaurant and/or a Bordbistro. The Intercity trains of DB have been recently updated to include electric outlets at table seats of the center aisle in coaches of both classes. Eurocity trains consist partly of wagons from neighboring train companies and may vary in terms of equipment."
conductorchrisManagement and marketing and so on, as well as stations.
I don't know the proportion of tickets Amtrak sells over the internet. I bet it is large and growing. And I suspect that they simply will not replace many ticket clerks when they leave until they get to a real minimum number.
In FY12 Amtrak's salaries, wages and benefits cost the company a tad over $2 billion. They chewed up 50.4 per cent of operating expenses and 70.7 per cent of operating revenues.
Amtrak's primary commercial competitors are domestic airlines and bus companies. The financials for two of the country's major airlines: Southwest and United Continental; and two of the country's intercity bus companies: Greyhound and Megabus were reviewed. They probably are typical for their industry.
Salaries, wages, and benefits at Southwest accounted for 28.8 per cent of FY12 operating expenses and 27.8 per cent of operating revenues. At United these items accounted for 21.4 per cent of operating expenses and 21.3 per cent of operating revenues.
Getting data for Greyhound and Megabus is a tad more difficult because they are owned by First Group and Stagecoach Group. Both are UK companies. Assuming that the salaries, wages, and benefits for the aforementioned segments are in line with those for the company as a whole, staff costs for Greyhound were approximately 46.1 per cent of operating expenses and 43 per cent of revenues in FY12. The numbers are similar for Stagecoach, i.e. 40.1 per cent of operating expenses and 38 per cent of revenues. However, given the difference in accounting rules, i.e. what is included in the UK that is not necessarily included in the U.S., as well as a different mix in their portfolio of businesses, this is not an absolute apples to apples comparison. It is an approximation.
Amtrak employs in-house maintenance personnel. So too do the airlines and bus companies. But most of the track work for Amtrak is contracted out. Thus, the compensation expenses for the contractors would be embedded in the billings from them. The cost of maintenance of airports and highways is charged to the owners and flows through to the users in fees.
Recognizing that the freight carriers are different businesses than Amtrak, I thought it would be interesting to look at their compensation expenses. In FY12 Norfolk Southern's compensation and benefits expenses were 37.4 per cent of operating expenses and 26.8 per cent of operating revenues. For the Kansas City Southern the numbers were 28.3 and 19.2 per cent.
Comparing expenses across companies, especially when they stem from other countries or companies with a different mission, is dicy. Nevertheless, it appears that Amtrak's compensation expenses are high relative to those of its major competitors.
Thank you, sam1, for such detailed information. It really assists in having an informed discussion when these numbers can be presented, even with the appropriate cautions as to use.
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