Review of Railway Operations in 1946 Assocation of American Railroads Bureau o

Review of Railway Operations in 1946 Assocation of American Railroads Bureau o

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Review of Railway Operations in 1946 Assocation of American Railroads Bureau o
A Review of Railway Operations in 1946 Assocation of American Railroads Bureau of Railway Economics by Julius Parmelee 1947   32 Pages
Transition from war to normal peacetime activity is usually characterized by lowered levels of industrial output while industry reconverts, by a short supply of goods in relation to demand, by rising prices and labor unrest, and by other disturbing influences. The year 1946 was no exception to that general rule, experiencing most of the ills that follow in the wake of war, although weaving its own pattern in keeping with political and economic conditions of the times.
Had it not been for strikes and work slow-downs in 1946, the reconversion period following the second World War probably would have been the shortest and most satisfactory in history. Demobilization of the armed forces was effectively carried out. Employment continued at record peacetime levels. Retooling of industry was accomplished in a remarkably short period of time. But these favorable factors were largely offset by persistent work stoppages growing out of exorbitant wage and working demands. The American people expressed their disapproval of the situation at the polls in November, also in their reaction to the second strike in the bituminous coal fields which began on November 20.
The railroad industry in 1946 felt the effects of these transition factors, both directly and indirectly. Railroad engineers and trainmen walked off their jobs on May 23 and for two days railroad operations were at a virtual standstill. This was the first national railroad strike in nearly a quarter of a century. Even more crippling to railroad operations were the two coal strikes, because of the length of time involved. The first of these began on April 1 and extended to May 29, with a 2-week "truce" period from May 13 to May 27. The second began on November 20 and extended to December 7. Passenger train operations were curtailed during these periods and embargoes on freight shipments were invoked.
Strikes in other industries also affected railroad operations, reducing and unbalancing traffic, and slowing down the delivery of new equipment and materials and supplies. These included the automobile, steel, meat packing, electrical supply and maritime strikes, as well as hundreds of other general, local, and jurisdictional strikes.
Railroad traffic in 1946 was about midway between the prewar and war peaks. Freight ton-miles were 20 per cent below the 3944 war peak and 13 per cent below 1945, but were above the 1929 prewar high by 32 per cent. Passenger-miles dropped 32 per cent below 1944, and 30 per cent below 1945, but were 38 per cent greater than in 1920.
Notwithstanding this greatest volume of peacetime traffic in history, railroad net earnings were little better than those of the depression years that preceded the war. Sharply increased wage rates and prices of fuel, material and supplies narrowed the margin between revenues and expenses to the lowest relative point since 1920. In the 57 years for which Interstate Commerce Commission records are available, the operating ratio has exceeded that of 1946 in only two years-1919 and 1920. In those two years, the railroads were under government control or were operated under government guaranty.
Railroad wage increases of 16 cents per hour were awarded early in April, retroactive to January 1. This increase of about 17 per cent (later raised to nearly 20 per cent as the result of an additional 21/2 cents per hour effective May 22), together with two previous wage increases during the war (in 1941 and 1943), and substantial price increases since 1940. foreshadowed an increase in operating costs of nearly two billion dollars in 1946.
In view of the seriousness of the situation thus facing them early in 1946, the railroads on April 15 petitioned the Interstate Commerce Commission for authority to increase freight rates by between 19 and 20 per cent, on the average. The revenue to be derived from the increase thus sought was estimated at about a billion dollars per year.
After brief hearings in May, the Commission on June 20 authorized a small interim increase, effective July 1, 1946, which added about $180 million, or 6 per cent, to freight revenues in the latter half of the year.
After further and more extended hearings in July, August and September, the Commission handed down its final decision on December 5. The freight rate increases authorized, including the interim increases of July 1, approximate 17.6 per cent, estimated by the carriers on the basis of 1947 operations at $985 million, inclusive of the $180 million already awarded on July 1.
Since the filing of the carriers' original petition in April, further substantial increases in operating costs have taken place. Final settlement of the wage dispute toward the end of May .added 21/2 cents per hour to wage rates, on top of the 16 cents previously awarded. In July, the Crosser Bill was enacted, which increased the rate of payroll tax paid by railroad employers from 61/2 per cent to 83/4 per cent, effective January 1, 1947. Prices of fuel, materials and supplies have advanced 10.8 per cent since April. In all, these three factors will add about $351 million to operating costs in 1947. Other factors in the situation are (1) expiration of excess profits carry-back tax credits, which returned as much as $170,000,000 to the railroads in 1946; and (2) prospective continuing decline in railroad passenger traffic in 1947.
The total of the cost increases outlined above is $2,267 million. Against this increase in annual costs, freight revenues in 1947, it is hoped, will experience an increase of $985 million as the result of the final rate increase, or $805 million in addition to the $180 million already received during the last six months of 1946.

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