(the "Big Four" and the Switchmen's Union), numbering about 400,000 men, were acting without the active support of the other 11 important organizations whose membership was close to 1,600,000. There was conflict even among the brotherhoods, as President Lee of the trainmen had let it be known that he was against a strike. The strike order for the trainmen was not given by him but by the chairman of the trainmen on each railroad system. While giving these chairmen a free hand to act according to the wishes of the membership, he refused to accept responsibility for the results. The Administration had made it known when the crisis came that all of the forces of the Government would be put behind the railroads in sustaining the decision of the Labor Board and in keeping the wheels moving. Public organizations throughout the country had made elaborate preparations to do here what was so effectively done in England a short time before in a similar crisis. And finally the condition of unemployment gave the railroads an opportunity to recruit many experienced railroad men who had left the service during the war and had not been reemployed. These opposing forces were too great to be defied. The brotherhood leaders finally backed down as gracefully as they could under an implied assurance that the Board was then so overburdened by disputes over rules, which would be given preference over petitions affecting wages, that it would be many months before it could entertain any new proposals for wage reductions. A ruling was announced that no application for wage reductions for any class of employee would be entertained until all of the disputes over rules and kindred matters had been decided by the Board. It may be noted here that while further reductions were subsequently (in 1922) ordered by the Board for several classes of labor, including shopmen, trackmen, clerks, stationmen, and others, no further reductions were asked by the railroads or granted by the Board for the men in engine, train and yard service. As a matter of fact there is justice in the position of the train service brotherhoods that their wages were not increased relatively as much as those of other employees during the war, and that therefore they should not be called upon to assume decreases as great as those ordered for employees whose war-time gains had been greater. From the viewpoint of the railroad security holder the operating results of 1921 furnished ground for both optimism and pessimism. The optimistic view was that 1921 was much better than 1920. The opposite view was that the railroads, under war-period rates (which would surely be reduced by the Interstate Commerce Commission), were able to earn but little more than one-half of the sum defined by the Transportation Act as a fair return. In the year 1921 the net railway operating income for Class 1 railroads was $615,000,000. From this amount they had to meet their rentals, interest charges and other income deductions, pay dividends and make capital improvements. In order to earn the then statutory rate of 6% on the property values tentatively taken by the Commission in 1920 for rate-making purposes, the carriers should have earned $1,134,000,000. Instead of earning 6% they actually earned but 3.3%. The following table contains the condensed income account for 1919, compared with 1920 and with 1916. From the viewpoint of net income, the latter was the most prosperous year in railroad history. .... Net railway operating income It is customary in reviewing the results of any one year to make comparisons with the immediately preceding year. In this case the satisfaction that was afforded to the railroads by the 615 62 1,040 82.6 93.5 65.5 3.3 0.3 6.2 marked comparative improvement in 1921 over 1920 was tempered by the fact that 1920 was the poorest year in net income since the Interstate Commerce Commission, in 1888, began to publish the aggregate figures for all railroads. The net railway operating income in 1920 was not far from zero. The year 1921, therefore, could not be viewed in true perspective by taking 1920 as the basis for comparison. It should be compared with a pre-war year. For that purpose 1916 is taken here. It was the year immediately preceding the entrance of the United States into the World War and was one in which the net results were unusually favorable. The figures show that while the 1921 operating revenues were 55% greater than those of 1916, the 1921 operating expenses were 95% greater. The relation of expenses to revenues in the two years is shown by the operating ratio. In 1921, 82.6 cents out of every dollar of operating revenues were taken by operating expenses. The comparable ratio in 1916 was 65.5. The final result in net railway operating income was a return of 3.3% upon property investment in 1921, in contrast to a return of 6.2% in 1916. While it is true that the 1921 results would have been more favorable if the effect of the wage cuts and the abolition of some of the restrictive working rules had applied during the entire year instead of in but part of the year, yet there is a more important factor which bears in the opposite direction. If 1921 had been charged with its full normal proportion of maintenance, the re turn upon the investment would have been much smaller. In the almost desperate efforts of management to trim expenses to meet the heavily reduced earnings, practically every expenditure that could be avoided was deferred. Maintenance, as a result, was neglected, both in way and structures and in equipment. Inasmuch as the properties were returned at the termination of federal control in a sub-normal condition of repair, and inasmuch as but a part of the deferred maintenance was made up in 1920, the need for extensive and expensive maintenance programs in 1921 was pressing in nearly every element of way, structures and equipment. Such deferred work is always more costly than work done in season. There are no data from which may be computed the amount of this substantial maintenance debt of 1917-1921 to 1922 and the years which will follow, but the records give some indication of the state of equipment alone. At the close of 1921, 23% of passenger and freight locomotives were unserviceable, mainly because of needed repairs. Normally the unserviceable locomotives should not be more than 10% of the total. In the case of freight cars, 13% were unserviceable in December, 1921. The normal is from 4% to 6%. Then, too, there was the item of equipment renewals. The pre-war program of displacing the older types by new equipment had been substantially reduced since 1916. As a result, in 1921, there was much more than the normal percentage of locomotives and cars which had passed beyond their serviceable span of life and |