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Rail strike odds increase, which could put U.S. economy at further risk

After narrowly avoiding a strike in September, the U.S. rail companies could be about to run out of luck.

One of the largest rail worker unions in the country has rejected a contract that was brokered by the White House, which could result in a strike as early as midnight Dec. 9, costing the economy as much as $2 billion per day and putting a chokehold on supply lines right in the heart of the holiday season.

SMART Transportation Division, which represents rail conductors, has rejected the offer. That follows the November “no” vote from the Brotherhood of Railroad Signalmen (BRS). Workers are unhappy with attendance and sick leave policies on freight railroads, saying workers are penalized for taking time off.

Not every union has shot down the proposed contract. In fact, seven of the 12 unions have agreed to it. SMART, with 28,000 members, is one of the most influential and largest rail unions, though, so its rejection of the deal is significant.

Negotiations for a new deal have been ongoing since 2020. The current agreement unions are voting on includes a 24% wage increase over a five-year period, retroactive to 2020 as well as an $11,000 payout to members upon ratification.

Contract negotiations are ongoing and a strike is not a certainty. Should any of the unions not approve the deal and call on a strike, the other unions would likely join them in the action, regardless of their standing.

Should a strike be called, Congress has the ability to intervene. The Railway Labor Act of 1926 gives the government permission to impose a contract on railroads to put an end to a rail strike. However, the White House has signaled it would prefer to avoid government intervention.

Any sustained work action could have consequential effects on the economy, however.

“We’re already facing a supply chain crisis, and now with this on top of it, it could just be a fast accelerant towards a recession,” Daraius Irani, chief economist at Towson University’s Regional Economic Studies Institute and railroad economics expert, told Fortune last month. “This would be one of those things that push the economy towards an inflationary recession.”

A strike would threaten everything from coal shipments to the drinking water supply, along with passenger rails.

A spokesperson for the Brotherhood of Maintenance of Way Employees Division (BMWED), which voted against the agreement on Oct. 10 and is the third largest rail union in the country, said a strike is not the preferred outcome. That sentiment was echoed by SMART.

“SMART-TD members with their votes have spoken, it’s now back to the bargaining table for our operating craft members,” said SMART-TD President Jeremy Ferguson in a statement on Monday. “This can all be settled through negotiations and without a strike. A settlement would be in the best interests of the workers, the railroads, shippers and the American people.”

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