Railroading has been a troubled industry for half a century. The troubles have approached the crisis stage once again during the past few years. Much of the railroad system in the industrial heartland of the nation-east of Chicago and north of the Potomac and Ohio rivers-is in bankruptcy. These bankruptcies, furthermore, are not yielding to the traditional solution of financial reorganizations. The rate of return on the investment of Class 1 railroads even in the "prosperous" south and west has averaged only about 3.6 percent per year during the past six years. The recent surge in railroad traffic, causing ton-miles to attain all-time peaks, has not generated a corresponding improvement in profits, thus causing railroad managements and analysts to speak of their "profitless boom". This gives rise to fears that another economic recession may send more railroads into bankruptcy. The origins of the railroad problem reside in the simple fact that the economy is expanding in areas that do not typically produce much new traffic of a type suited to conventional rail transport. Competition from trucking, other specialized modes of transport, and transport alternatives (such as high voltage transmission of electricity, synthetic materials, and recycling of waste materials) are further circumscribing the demand for rail freight service. The railroads have also suffered productivity problems, caused in part by these shifts in the freight market. Employment in the industry has declined by nearly two thirds during the postwar period, enabling the industry to record gains in labor productivity as great or greater than the average for private industry. However, to achieve this reduction in labor inputs, the industry has to maintain or slightly increase its employment of capital; as a result, railroad capital productivity, the ratio of output to capital inputs, has shown no growth or has even declined slightly. Total or multiple factor productivity measures that combine labor and capital inputs suggest that railroads' overall productivity gains have been no higher and perhaps lower than the average for private industry.

  • Corporate Authors:

    National Bureau of Economic Research, Incorporated

    261 Madison Avenue
    New York, NY  United States  10016
  • Authors:
    • Meyer, J R
    • Morton, A L
  • Publication Date: 1975-9

Media Info

Subject/Index Terms

Filing Info

  • Accession Number: 00128636
  • Record Type: Publication
  • Source Agency: Explorations in Economic Research
  • Files: TRIS
  • Created Date: Jan 14 1976 12:00AM