for the year ending June 30, 1907, with 1898, when this question
was last up, it is shown by reports of the Interstate Commerce
Commission that gross revenue from operations, as well as income
from investments, increased $1,380,000,000. This is a very large
sum, but let us see what becomes of it. Increased wages paid to
employes consumed $577,000,000, or 42 per cent., purchase of material
included in operating expenses, $354,000,000, or 26 per cent. of the
increased income, and these material purchases represented largely
labor involved in their production. Increases in betterments and
miscellaneous deductions consumed $77,000,000, or 6 per cent. of the
increased income. Larger payments for interest on funded debt and
current liabilities consumed $96,000,000, or 7 per cent., and larger
taxes 2.5 per cent., leaving $240,000,000, or 16.5 per cent. of the
increased income for the owners of the properties, the stockholders.
In 1898 dividends were less than 2 per cent. of the capital stock,
and in 1907, even with the large increase noted, they were only 4 per
cent. Contrast this with the manufacturers' returns of 15 per cent.,
the farmers' of 10 per cent., and the National banks' of 18 to 20 per
cent. on their capitalization.
Reduction in railway mail pay was not justified in 1898; it was far
less justified in 1907. On the contrary, there has been a large fall
in mail pay per ton mile, and conditions under which mails are
transported are becoming more and more onerous. The cost of building
a railway postoffice car to the present plans and specifications of
the Postoffice Department is at least 50 per cent. more than it was
in 1898, although pay received for handling these cars, that weigh
from 25 to 30 per cent. more than formerly, has been arbitrarily cut
over 16 per cent. by the Act of Congress of 1907, and has since been
further cut through readjustment of routes. For the year ending June
30, 1908, the railroads received gross $48,155,379, including railway
postoffice pay, for carrying 80 per cent. greater tonnage of mails
than in 1898, a sum $12,747,629 less than it would have been but for
the reduction of rate from 12.59 cents in 1898 to 9.94 cents in 1908.
In face of this, as we have shown, arbitrary cuts of $8,500,000 more
have been made, a grand total of over $21,000,000 less paid now than
ten years ago.
About eighteen months ago the conclusion was reached that heavier
and stronger cars were demanded by changed conditions resulting in
heavier trains, greater speed and increased frequency and consequent
risk of accident to clerks and mail in collisions and wrecks. After
careful investigation and expert testimony the specifications were
revised so that full 60-foot cars would weigh about 100,000 pounds
instead of 80,000 pounds, and be greatly strengthened by the free use
of steel plates and oak timbers. To meet the views of car builders,
east and west, two plans and specifications, slightly differing,
were adopted as standard, and railroads were given the option of
conforming to one or the other. The best known anti-telescoping
features were adopted in both plans, producing in the judgment of
responsible car builders a car of exceptional resisting and carrying
power. When new lines of cars are authorized by the Department,
or new cars are ordered to take the place of old cars in service,
companies operating the routes are furnished copies of these
specifications and the superintendent of division is instructed to
see that cars are built in conformity therewith. Inspections are made
while the car is in the shop, and when it is completed a full report
is made and forwarded to the Department. A decision is then reached
as to whether the car is satisfactory and can be accepted.
(Annual Report Postmaster-General for 1905.)
This increase in weight of a postal car might not be thought of much
moment, but it means to the railroads the movement of 1,000,000
additional gross ton miles per car per year, costing them $10,000
per annum in operating expenses, whilst, as shown, they receive 16
per cent. less railway postoffice pay now than formerly.
United States Postal Laws and Regulations, Section 1164, provide
that the average weight of the mails used in fixing rates shall be
established by the actual weighing of the mails for a period of not
less than thirty days and "_not less frequently_ than one in every
four years." The construction placed upon this by the Department has
been the one which reduced to the minimum the pay which the railroads
receive for services rendered. If mail traffic were stationary,
weighing every four years would not matter much, but the increase of
mail matter throughout the United States has been very great, and,
because of the policy of the Department, to weigh the mails not more
frequently than every four years, heavy losses have resulted through
the railroads having to haul tonnage for three successive years
following each weighing for which they receive no pay.
As a result of this policy of quadrennial weighings, the roads in
Interstate Commerce Groups 7, 8, 9 and 10 (including the territory
west of the Missouri river and the Mississippi below St. Louis)
between 1878 and 1905 suffered a loss of $19,200,000, or 12 per cent.
of the aggregate railway mail pay, compared with what they should
have received if the mails had been weighed annually. In other words,
this loss is equivalent to a reduction in the rate received per ton
mile in these groups of states of 12 per cent. The loss to roads in
the western part of the United States is most striking, due as it is
to the rapid growth of that section. The same reduction, though to a
slightly less degree, obtains in other parts of the United States.
COMPARATIVE RETURNS TO THE RAILROADS FROM CONDUCTING MAIL. PASSENGER
AND FREIGHT SERVICE IN THE UNITED STATES.
In order to make a fair comparison of operating results from
different classes of traffic, it is necessary to consider them under
substantially similar conditions. The best measure of railroad
service is work done, or weight multiplied by distance carried; in
other words, the ton mileage. A comparison of services differing so
widely as the mail, passenger and freight on the basis of ton mileage
of such business is, however, unfair, because in the two former an
excessive proportion of dead weight must be transported for each ton
of paying load, whilst with freight traffic the proportion of dead
weight is small. The hauling power of a locomotive is measured not
by revenue ton miles, but by ton miles of gross weight, it making
little difference to the locomotive as to what this gross ton mileage
is composed of, the gross tonnage and the speed at which it must be
moved being the factors that consume the energy of the locomotive.
A computation has been made of ton mileage on each individual mail
route by multiplying weight carried by length of route; to the sum
of these we add the dead weight of cars. The report of the Second
Assistant Postmaster-General for year ending June 30, 1908, page
32, gives the number of cars engaged in mail service, which we have
multiplied by the average mileage made by the average car, based
on experience of the Union Pacific and Southern Pacific Systems,
to ascertain total car mileage for the United States. Multiplying
this by the dead weight of a car gives the ton mileage of dead
weight, which, added to the ton mileage of mails, gives the gross
ton mileage, measure of work and cost imposed on the railroads
in return for the pay they receive for handling the mails. These
computations are shown in the following statements, the results being
conservative, as for want of accurate data it has been necessary to
omit some work which the railroads do, which, if ascertainable, would
increase the cost. For example, we have made no charge for the dead
weight of that portion of baggage cars devoted to the handling of
pouch mail, such pouch service, according to the Postmaster-General's
report, covering annually on railroads and express trains
122,027,597 miles; nor for the dead weight of storage mail cars
provided by the railroads. Neither has any account been taken of
the value of transportation given mail clerks, which, based on the
Postmaster-General's report of 1908, amounted to 629,778,443 miles,
which at 2 cents a mile would be $12,500,000; nor for the value
of transportation or postal commissions of Postoffice Department
officials; nor does it take into account special service rendered by
the railroads, such as delivering mail at stations, value of space
furnished by the railroads and required of them by the Postoffice
Department at important junction and terminal points for mail
distribution and accommodation of government transfer clerks.
The statistics of passenger service in the following statements are
based on the 1907 Annual Report of Statistics of Railways published
by the Interstate Commerce Commission (1908 figures, which would
show higher operating cost, not available), with the exception that
the average mileage per car per annum run by passenger cars is based
on the experience of the Union Pacific and Southern Pacific Systems.
Statistics of freight service are likewise based on the 1907 Report
of Statistics of Railways, freight car mileage being actually
reported by the Interstate Commerce Commission, dead weight per car
being computed from all freight cars handled on Union Pacific and
Southern Pacific Systems.
MAIL SERVICE.
Year Ending June 30, 1908.
Paid to the railroads for railway postoffice cars $ 4,567,366
Paid to the railroads for mail transportation 43,588,013
-----------
Total $48,155,379
Ton mileage of mails handled by railroads 484,683,135
Pay per revenue ton mile, including railway
postal pay car 9.94c
Pay per revenue ton mile, excluding railway
postal car pay 8.99c
R.P.O. Apartment. Total.
Number of cars (Postoffice Department
Report) 1,342 3,568 4,910
Average length (special mail weighing
1907), feet of mail apartment 59 27 --
Equivalent full R.P.O. cars 1,342 1,633 2,975
Miles run per car per annum (experience
of U. P. System and Southern
Pacific Company) 100,000 60,000 --
Total equivalent R.P.O. car miles 134,200,000 97,980,000 232,180,000
Miles traveled by R.P.O. clerks
(miles reported as traveled by crews
multiplied by average number of men
per crews) -- 629,778,443
Gross ton mileage--
Equivalent railway postal clerks, 232,180,000 miles, at
45 tons per car 10,448,100,000
Ton miles of clerks at 160 pounds per man 50,382,275
Revenue ton miles of mail, including pouch mail 484,683,135
--------------
Total gross ton miles(a) 10,983,165,410
Average weight of mail per equivalent full R.P.O. car (tons)(a) 2.09
Average weight of clerks per equivalent full R.P.O. car (tons) .22
Average weight of car per equivalent full R.P.O. car (tons) 45.00
Rate of mail and R.P.O. car pay per gross ton mile (cents) 0.438
Ratio of paying to dead load(a) 1 to 21.7
(a) No portion of mileage or weight of storage cars or cars handling
pouch mail has been considered.
PASSENGER SERVICE OTHER THAN MAILS.
Miles run Total car
Number per car miles run
of cars. per annum. per annum.
(a) (b)
Baggage and express, excluding 2,975
equivalent postal cars 7,404 60,000 444,240,000
Sleepers, diners and parlor cars 2,000 100,000 200,000,000
Coaches, etc. 31,594 40,000 1,263,760,000
------ -------------
Total 40,998 1,908,000,000
Passenger train miles, including mixed trains 541,439,176
Cars per train mile--
Mail 0.43
Others 3.52
----
Total 3.95
Gross ton mileage--
Baggage and express cars, 444,240,000x30 tons 13,327,000,000
Sleepers, diners and parlor cars, 200,000,000x50 tons 10,000,000,000
Coaches, etc., 1,263,000,000x40 tons 50,550,400,000
--------------
Total ton miles dead weight 73,877,400,000
--------------
Ton miles of passengers, 27,718,030 (a) passenger
miles at 150 pounds per passenger 2,078,891,552
Ton miles of baggage and express, 444,240,000 car miles
estimated at only 3 tons average load in a car 1,332,700,000
-------------
Total ton miles revenue load 3,411,591,552
Total gross ton miles 77,288,991,552
Total revenue received from passengers and express $621,939,274
Total revenue received per gross ton mile (cents) 0.805
Total revenue received per revenue ton mile (cents) 18.23
Ratio of paying weight to dead load 1 to 21.7
FREIGHT SERVICE.
Total miles run by freight cars (a) 17,122,259,754
Total ton miles dead weight, each car estimated
at 15 tons (b) 256,833,896,310
Total ton miles revenue freight (a) 236,601,390,413
---------------
Total gross ton miles 510,557,546,477
Ratio of paying to dead load 1 to 1.1
Total revenue received for transporting freight $1,823,651,998
Total revenue received per gross ton mile (cents) 0.369
Total revenue received per revenue ton mile (cents), (a) 0.759
Tons per car revenue freight (loaded and empty) 13.8
Revenue per car mile (cents) 10.5
(a) Statistics of Railways of United States, 1907.
(b) Experience of Union Pacific and Southern Pacific Systems.
RELATIVE COST OF SERVICE.
To determine the relative costs to the railroads of performing mail,
passenger and freight service, we must allocate the expenses to
freight and passenger service as a whole, afterwards apportioning
the latter to mails and other service. Railroad operating expenses
apply jointly to both passenger and freight trains, so that, with few
exceptions, it is impossible to determine exactly from any published
statistics the cost of passenger train service as distinguished
from freight. There are some items of train mile expense directly
connected with movement which are less for passenger than for freight
trains, whilst, on the other hand, many other expenses are greater
for passenger than for freight, such as danger from casualties,
necessity of expensive terminals, delays to other traffic through
preference given to passenger trains, additional main tracks, and,
particularly, higher standards of maintenance of roadbed required for
high speed passenger train movement.
On account of the impossibility of separating the expenses, we assume
that the above factors about balance each other and that the average
cost of running _all_ trains can be taken as either passenger or
freight train mile cost, respectively, without serious error.
We allocate a proportion of the passenger train cost to the mails on
the basis of the gross ton miles handled in each class of passenger
traffic.
The relative revenues and expenses are shown on opposite page, mail
revenues being as shown by 1908 Report of Postoffice Department, and
other statistics as given in the 1907 Statistics of Railways of the
United States, published by the Interstate Commerce Commission, or
are computed therefrom.
ALL RAILROADS IN UNITED STATES.
Summary of Mail, Passenger and Freight Service.
Other Total
Mails. Passenger. Passenger. Freight.
Gross revenue $ 48,155,379 621,939,274 670,094,653 1,823,651,998
Operating expenses $ 96,322,357 677,614,637 773,936,994 974,577,820
Taxes and interest on
bonds $ 23,503,973 165,582,552 189,086,525 235,468,467
Total expenses $119,826,330 843,197,189 963,023,519 1,210,046,281
Surplus -- -- -- 613,605,711
Deficit $ 71,670,951 221,257,915 292,928,866 --
Ton mileage (thousands)--
Revenue weight 484,683 3,411,592 3,896,275 236,601,390
Dead weight 10,498,482 73,877,400 84,375,882 256,833,896
Total gross 10,983,165 77,288,992 88,272,157 493,435,286
Tons dead weight per
ton revenue 21.7 21.7 21.7 1.1
Per gross ton mile (cents)--
Gross earnings 0.438 0.805 0.759 0.369
Operating expenses 0.877 0.877 0.877 0.197
Earnings over operating
expenses -- -- -- 0.172
Operating expenses over
earnings 0.439 0.072 0.118 --
Taxes and interest on
bonds 0.214 0.214 0.214 0.048
Surplus -- -- -- 0.124
Deficit 0.653 0.286 0.332 --
Per cent of operating
expenses to earnings 200 109 115 53
Gross expenses to earnings 249 135 144 67
Figures exclude dividends, betterments and additions, etc.
The above shows that whilst passenger service as a whole is
unremunerative, the mail earnings are hardly what they should be to
pay a fair share of the railroad operating expenses only, regardless
of taxes and interest.
Or, put in another way, our computations have shown that in each
passenger train run the railroads haul an average of 43/100 of a
mail car, and the contents of this car yielded average earnings of
9.4 cents for each mile run. The computation just made shows that
each freight car run, loaded or empty, yields a revenue to the
carrier of 10.5 cents per mile. Incredible as this may seem, it is
understandable when we reflect that the railroads transport 1.1 tons
of dead weight for each ton of freight for which they are paid; with
mail they transport 21.7 tons, or twenty times as much. The freight
rate is .759c per ton mile, the mail rate 9.94c, or only thirteen
times as much.
Arguing in still another way: Average number of cars in each
passenger train handled in United States is 3.95, of which mail cars
amount to 0.43, or 11 per cent. Eleven per cent. of the average
earnings of a passenger train is 13.8 cents, but mail contributed
only 9.4 cents. That is, it should pay 47 per cent. more than it does
to be made to contribute a fair share to the insufficient earnings
of a passenger train. Mails are fairly responsible on basis of space
used for 11 per cent. of the cost of running a passenger train, or
16.17 cents, and as dead weight per foot of space is greater with
mails, their proportion of train mile cost is even larger. They pay
little more than one-half this cost.
By building larger capacity cars and larger engines, the cost of
handling freight traffic, entirely in the control of the carrier, has
been reduced to follow rate reductions and increased expenses.
On the other hand, because methods of conducting passenger traffic
are largely--and mail traffic entirely--beyond their control the cost
of handling mail and passengers has been steadily increasing, and, as
revenue has not increased, the net revenue or margin of profit has
been cut to a point where it is unremunerative.
The argument advanced by advocates of reduced mail pay, that
increasing density permitted economies and that lower rates would
yield more net, is not applicable when the carriers' hands are tied
and measures of economy so successfully applied to handling freight
are prohibited. The following will illustrate this:
On routes where pouch service is used mail is handled with express
and baggage without much increase of cost over other passenger
traffic. A somewhat greater mail traffic obliges the railroads to
furnish apartment cars, at increased expense and dead weight for the
postoffice feature, but still permitting the railroads to carry other
traffic in the same car. A still further increase in weight means the
establishment of full R. P. O. lines for which the railroads receive
extra, but inadequate, compensation, these cars being used for no
other class of traffic and adding largely to the weight and cost of
train service. Even after the route has been made an R. P. O. route,
the railroads are not permitted to economize by carrying more mail
in the car, and as traffic density grows the roads must under the
requirements of the Department add more cars, almost in proportion
to the business, as the loads carried in R. P. O. cars, as shown
by recent special weighing, average only 2¾ tons, and many of them
return empty--for which empty haul the railroads often receive no
pay. When the mail business has assumed very large proportions and
the R. P. O. cars have multiplied in ratio therewith, special trains
are then added to carry the bulk of the mail, being run at very high
speed and adding to the railroad expense account in a far higher
degree per unit of business than any other class of traffic.
In contrast to the above, baggage and express are very generally
hauled in the same and a much lighter and less costly car than the
mail car, and increase in tonnage is accommodated by hauling greater
loads per car. In the case of freight, increased density means larger
car and train loads and greatly reduced costs of operating per ton
mile.
Despite these differences in conditions, the automatic scale has
secured to the Government a larger reduction in mail rates per
ton mile in the last ten years than the percentage of fall in
freight rates, despite higher labor and material costs of railroad
operating. As a result, the mail business--which, according to
evidence introduced before the Congressional Committee of 1899, was
unprofitable at that time, has been made more unprofitable at the
present time by the heavy rate reductions of 1906-7.
As the greatest reduction made deals with mail routes on which
traffic is heaviest, a consideration should be given to the following
conditions of handling mail on such routes:
HEAVY TRAFFIC MAIL ROUTES.
On very many of the heavy traffic routes where the principal
reduction in pay occurred a large part of the mail is now handled
in special mail trains run at excessively high rates of speed. Such
trains introduce the following conditions:
1. A very much greater liability to accident. A large proportion of
the deplorable accidents that have occurred on the American railroads
in recent years have occurred to excessively high speed trains,
accidents to such trains being almost invariably destructive to
life and property. An examination of serious accidents on the Union
Pacific System and Southern Pacific Company for the calendar year
1906 shows that 36 per cent. of the property damage from all causes,
including negligence, as traceable to trains not under control and
excessive speed, whilst 30 per cent. additional damage was due to
causes that might prevent inferior trains getting out of their way,
such as keeping main line on time of superior trains, failure to
observe signals or orders, etc.
2. Mail trains run at excessive high speed are much more expensive to
operate than other trains, for the following reasons:
(_a_) Fuel consumption per traffic unit is very much greater at
high speed because of diminished tractive power of locomotives.
(_b_) A relative greater hauling capacity of locomotives must
be consumed in moving trains at higher speeds.
(_c_) Excessive speed requires higher standards of track
maintenance, double-tracking, block signals, heavy rail, better
ballasted roadbed, etc., etc.
(_d_) High speed means increased wear and tear on equipment and
track.
(_e_) High speed trains are expensive, delaying and adding to
the cost of other traffic.
3. Speed of trains carrying mails has been constantly increased, a
study made of the speed per hour made on fastest trains on which
R. P. O. cars are handled on seventeen of the principal mail routes
giving the following results:
Average of fastest train on seventeen mail routes:
Speed
Year. (Miles per Hour.) Relative.
1905 42.21 136
1899 39.23 126
1890 34.35 110
1885 31.34 100
Average increase per year 0.55
With the above increase in speed, rates paid the railroads have
automatically decreased whilst expenses have largely increased to
provide for the above greater speed and because of increase in
prices of labor and materials of all kinds in the past five or six
years. This increase in speed has been made coincident with growth
of freight traffic, which is the railroads' profitable business,
_the non-profitable high speed trains delaying the profitable ones,
increasing their cost and incurring liability to accident_.
4. Earnings of mail trains supposedly high are not higher than other
passenger trains, which, as a whole, earn very much less per mile
run than freight, relative figures being as shown by last report of
the Interstate Commerce Commission--as 100 is to 218, whilst the
cost of running passenger trains is as much, if not more. This is
particularly the case with high speed passenger trains, which is
the most unprofitable business in which railroads are engaged. (On
Union Pacific System last year earnings per passenger train mile were
$1.71, per freight train mile $4.31.)