As Americans go on a shopping bender, railroad operators carrying train loads of consumer purchases are adding thousands of jobs, and some are offering hefty hiring incentives to draw applicants.
Union Pacific is dangling $10,000 hiring bonuses for Chicago-area train conductors and engineers, and $15,000 for diesel technicians, while BNSF Railway has advertised a $20,000 incentive for a diesel technician job in the area. Norfolk Southern Railway also has ambitious hiring plans, though it is not offering hiring incentives.
Chicago, considered the rail epicenter of North America because six major railroads converge here, is feeling the labor crunch.
The hunt for new workers comes after a steep drop in railroad employment at the end of 2015, which was caused by a decline in consumer spending and plunge in shipments of coal resulting from a mild winter and competition from natural gas, said John Gray, senior vice president of policy and economics at the Association of American Railroads.
Though coal has recovered a bit since then, thanks to export markets, the primary driver of workforce needs is robust consumer spending and Americans’ penchant for ordering online and having items shipped to their doorsteps, Gray said.
“We’re seeing almost every month a new record in the amount of trailers and containers we’re handling, and almost all of that is driven by consumer spending,” he said. The largest single rail customer, he added, is shipper UPS.
“There is an awful lot of business being handled that is caused by online shopping,” he said.
Liisa Stark, assistant vice president of public affairs for Union Pacific’s northern region, said the railroads are a bellwether of the nation’s economy, as freight volumes increase when the economy improves and people consume more.
The last time Omaha, Neb.-based Union Pacific offered hiring incentives was during the booming economy of the early 2000s, Stark said. Normally there are plenty of takers for the good-paying positions. Engineers, who operate the trains, and conductors, who manage the cargo — both positions that require no previous experience or even a high school diploma — start at $60,000 annually for the first two years and go up to a median of $83,000 after that, Stark said. Diesel electricians, who must have prior electrical experience but not a college degree, earn nearly $63,000 a year, she said.
Most railroads are perpetually hiring because of attrition from retirements, but massive incentives are unusual and reflect increased rail demand from strong consumer spending, Morningstar’s Schoonmaker said. Retail sales went up 0.8 percent in May from the month before, better than expected, and were 5.9 percent higher than a year before.
Consumer goods are increasingly transported via railroad, which is slower but more cost-efficient than via truck. A shortage of truck drivers, driven by increased shipping demand from companies such as Amazon and Wal-Mart, has pushed up the price of goods as well as the cost of trucking, making rail freight more attractive, Schoonmaker said.
At Union Pacific, volumes of intermodal trailers and containers — which are used for consumer freight, as opposed to coal or grain — are up 7 percent in the second quarter of this year to date compared with the same period last year. Overall freight traffic was up 4 percent, dragged down by a decline in coal volume, though that also is a healthy growth rate, Schoonmaker said.
Union Pacific, whose rails connect 23 states in the western two-thirds of the country, plans to hire 2,100 engineers and conductors and 900 mechanical positions this year across its network, and is offering varying levels of hiring incentives in different markets as well as retention bonuses to older workers considering retirement. The company also recently announced longer-term investments to develop the skills of the workforce in certain strategic areas, including Chicago, which is home to 4,000 of its 42,000 employees.
Meanwhile, its competitor BNSF Railway is offering hiring incentives starting at $15,000 to help it fill more than 3,500 hourly positions across its 28-state network, in areas including transportation, engineering, dispatching and mechanical crafts, said Andy Williams, spokesman for the Fort Worth, Texas-based company.
Over the next 12 months, Norfolk Southern Railway expects to hire 1,800 employees across its 22-state network in the eastern part of the United States, including 55 conductors in the Chicago area, to meet demand driven by increasing freight volume, said spokeswoman Susan Terpay. Conductors start at $47,000 per year and engineers can earn up to $100,000, depending on location and seniority, she said. The Norfolk, Va.-based railroad is not offering hiring incentives.
Staffing has been challenging because of the tight labor market as well as the growing technological sophistication of some railroad jobs that now require higher skill levels, Gray said. In addition, it can be difficult to find people with the right temperament to work on freight trains, as the jobs entail long and irregular hours and, on occasion, having to spend several days away from home, he said.
Beyond using hiring incentives to address its immediate labor needs, Union Pacific is making longer-term investments to beef up regional talent pools.
Chicago is among four cities slated to benefit from an inaugural $3 million Union Pacific grant to the Local Initiatives Support Corp., a nonprofit that supports projects to revitalize struggling communities. The money will expand LISC’s Financial Opportunity Centers, which offer career counseling, financial coaching and job skills training to low-income residents, and Union Pacific intends to hire some graduates for train crew or trades positions.
The company also participated in the Chicago Cook Workforce Partnership’s pilot program of Opportunity Works, which kicked off last summer to provide subsidized internships and job readiness support to suburban Cook County youths who are neither working nor in school. Union Pacific is considering whether to take part in the second round of the 10-week program, which targets manufacturing and IT as well as the transportation, distribution and logistics industry.
While unemployment is low — 3.8 percent nationally, and 4.3 percent in Illinois after five consecutive months of declines — joblessness remains a significant challenge in certain parts of the city and state, and among people who don’t have a college degree. More than 60 percent of Chicago adults over 25 have a high school diploma or less, and there are not many good-paying job options for that demographic.
Union Pacific’s train crew jobs, which include conductors and engineers, require candidates to be at least 18 years old and have a driver’s license, and pass an eighth-grade reading test. They also must pass drug tests and can’t have received drug- or alcohol-related driving convictions or license revocations or suspensions within the past 36 months.
Certain jobs also require workers to be able to lift 25 pounds, and on rare occasions up to 80 pounds, Stark said.
Workers receive the hiring incentives as they progress through the training process. Union Pacific’s train crew workers get $2,000 after the second week of training, another $3,000 after a probationary period and $5,000 after 18 to 20 months following the start date. At BNSF, a $20,000 hiring incentive for diesel electricians is phased in over three years.
The Equal Employment Opportunity Commission has challenged the legality of some railroad hiring practices. The federal agency last summer sued CSX Transportation over several strength tests it required potential hires to complete — including isokinetic strength testing, a three-minute step test to measure aerobic capacity and a discontinued arm endurance test — alleging they had a discriminatory effect on women. Even if employers prove that such practices are necessary for safe and efficient performance of certain jobs, the tests are unlawful if it is shown there are alternative practices that can achieve the employers’ objectives with less discriminatory effect, the EEOC said in a release. It did not accuse CSX of intentional discrimination.
The EEOC recently announced that it had reached a settlement with Florida-based CSX, which is one of the six railroads that converge in Chicago. The company will cease the particular strength testing practices and pay $3.2 million into a fund to repay lost wages and benefits to a class of women in more than 20 states who were denied positions because of the testing, the EEOC said.
“CSX maintains a strong commitment to diversity, which we believe is essential to broadening access to the greatest talent and to contributing to the overall success of our company,” CSX spokesman Bryan Tucker said in an emailed statement. “We are committed to fulfilling our obligations under this resolution and to promoting an environment that embraces teamwork, gender diversity and inclusion. Our dedication to these values will ensure the best outcome for our employees, our company and our shareholders.”
Unlike some of its peers, CSX is not on a hiring spree, as its existing crews are adequately meeting demand in Chicago and throughout its 23-state network in the eastern part of the country, the company said.