main lines at the present time have assumed, on account of increased
weight of equipment and excessive speed required, enormous
proportions. We now have in such service on our lines engines
weighing exclusive of tender 222,000 pounds, this power being 60 per
cent. heavier and twice as costly as locomotives used in the same
class of service ten years ago, burning double the amount of fuel.
Engineers running these locomotives receive higher pay because of the
greater size of these engines--to say nothing of recent increases
made in their schedules. Such heavy power moving at fast speed
is extremely destructive to the roadbed, requiring a much higher
standard of maintenance than formerly, maintenance of way cost in
the past few years having gone up 50 per cent. Engine failures are
largely confined to fast passenger trains, and, in general, expenses
are increased all along the line because of their introduction.
6. As illustrating the additions to expenses because of increased
track maintenance on account of fast passenger and mail trains, we
have made a study of statistics, using the Interstate Commerce report
of 1906 as a basis, of seven roads having a large proportion of fast
passenger service and seven roads having a moderate speed passenger
service, but with a large proportion of freight service. On the
roads first named the average cost of maintenance of way per mile
was $2,951, and on roads in the latter class $1,565. The operating
expenses per train mile in the former class were $1.47, and in the
latter $1.33. The roads in the former class, on account of large
number of excessively high-speed trains, were obliged to double-track
their lines, which directly increased maintenance expenses.
PAY FOR RAILWAY POSTAL CARS.
The large reduction made by Act of March 2, 1907, in pay for railway
postal cars was made in face of large increase in the cost of
constructing such cars, due to higher prices of labor and material
and greater cost of meeting the more exacting specifications of the
Postoffice Department. Changing to steel construction, increases in
weight, and generally heavier operating expenses, have created an
extremely large increase in cost of moving these cars. The standard
railway postal car of only a few years ago, 60 feet long, weighed
80,000 pounds and cost about $5,500. The standard railway postoffice
cars, 60 feet long, of wooden construction, used on the railroads
with which I am connected, weigh over 100,000 pounds each, or
one-fourth more weight, and costs 40 per cent. more, whilst our new
standard postal cars of steel construction weigh 108,000 pounds and
cost over $9,000, or 60 per cent. more than the car of a few years
ago.
An argument sometimes made in favor of a lowering of R. P. O. car
pay is that for apartment cars used in runs where mail density does
not require a full car, no additional compensation is allowed. But
we feel that a fair consideration of the circumstances under which
mail is handled as compared with other traffic will justify the
conclusion that this is not an argument in favor of reducing R. P.
O. pay, but rather for allowing the railroad additional compensation
for the apartment cars as well. Both services require the furnishing
of special features in the way of traveling postoffices not required
except for the convenience of the Postoffice Department to enable it
to do work while mail is in transit, such as ordinarily performed in
office buildings. The full postal car is more expensive to the roads,
as it always means additional car service, whilst in some cases of
apartment cars the space not occupied by the traveling postoffice is
adequate to take care of baggage and express, though very frequently
this service also means additional car movement that would not be
necessary but for the postoffice feature.
The saving to the railroads from reduction in car mileage that would
be possible if it were not obliged to furnish traveling postoffices,
but could use the space occupied by racks and other postoffice
features by loading additional mail in cars, would be many times the
revenue allowed by the railway postal cars.
To illustrate: The car mileage of postal cars (changing apartment
cars to full cars on basis of length) is 232,180,000 per annum;
the ton mileage of mail 484,683,135, or 2.09 tons per car. From
figures obtained from the Postoffice Department, average car weights
shown on page 59, table "EE," special mail weighing of 1907, it is
ascertained that storage mail cars, which, of course, contain no
postoffice features, carry an average of 7.04 tons of mail. At this
rate the whole mail business could be carried by the movement of
68,844,000 car miles, or 163,336,000 less than actually employed, due
to the postoffice features. The total railway postal car pay is only
$4,567,366, or only 2.8 cents per additional car mile, whilst the
operating expenses chargeable to running these 163,336,000 car miles,
of 70 per cent. of the total movement, amount to $67,000,000.
But for the postoffice feature, the combined weight of an entire
route could many times be handled in a single car such as is used
for express instead of several heavy and expensive postoffice cars,
whilst often extra cars for storage mail must be added, for which no
extra pay is allowed, the cost of running these storage cars also not
being included in the computation of cost of service, as no accurate
statistics of their number or car mileage are available.
In addition to the furnishing of storage cars, although many
R. P. O. routes are paid for on a basis of 40 foot cars, it is not
economical for the railroads to construct such cars which are not
interchangeable with other equipment and which would have to be
thrown aside if through growth of traffic larger cars are afterwards
required. As a result, full 60-foot R. P. O. cars have for years been
furnished on many 40 and 50-foot routes, the railroad getting no
credit for this, whilst on many other routes R. P. O. cars have been
run in advance of the fixing of R. P. O. pay for them.
On a number of routes postal car pay has been allowed for running
full cars in one direction only, classing such routes as half-lines.
This obliges the railroads to move the car in the opposite direction
without pay, the small additional compensation of less than 4 cents
per mile run received in one direction being entirely inadequate to
compensate the road for the empty haul--to say nothing of allowing
anything for moving it in direction for which pay is received. To
illustrate: The Union Pacific Railroad in one case between Council
Bluffs, Iowa, and Ogden, Utah, 1,003 miles, receives no pay for
handling east-bound a 60-foot mail car, which is paid for west-bound
only, six mail cars being required on this line. The R. P. O. pay per
car mile, including movement in both directions, is only 2.24 cents,
or about what would be received for transporting a single passenger,
although a standard passenger coach has a capacity for 70 passengers.
In connection with the railway postoffice, an item not often
considered is the value of transportation furnished clerks in the
railway mail and compartment cars. Figuring this at 2 cents per
mile, which is about the lowest passenger fare, the total value of
this transportation for clerks in railway postoffice cars would be
$8,600,000 per annum, or $4,000,000 more than the railroads receive
for the handling of these cars, and the value of transportation in
the case of apartment cars would be $4,000,000 per annum additional.
In addition to this, a large amount of free transportation is
required annually by the Postoffice Department for inspectors and
other officers of the Department.
The Postoffice Department issues annually about six hundred traveling
commissions to postoffice inspectors and other postal officials,
and requires railroad companies to honor such commissions for free
transportation on all trains on all lines on which mails are carried.
In some cases these commissions are issued to Government officials
whose official duties are in no way connected with the transportation
of mails on railroads. The railroads have no control whatever over
the issuance of these commissions and can not even secure from the
Postoffice Department a list of them, the Department holding that
the list is confidential. These commissions are frequently used
for personal travel in violation of the rulings of the Interstate
Commerce Commission. In brief, the Postoffice Department in effect
arbitrarily issued about six hundred annual passes over every mail
carrying railroad in the United States, which is equivalent to about
200,000 annual passes.
POSTAL DEFICIT.
In investigating the subject of railway mail pay, we have been
struck very forcibly with changes which have taken place in the
revenues and expenditures of the Postoffice Department since 1899,
when this subject was last reviewed. Although postal operations
still show a deficit, it is a fact that its revenues have increased
in a remarkable degree, and the deficit is certainly not due to the
amounts paid to the railroads for hauling mail, as these payments are
relatively far less now than formerly. Revenues of the Postoffice
Department have grown from $102,000,000 in 1900 to over $191,000,000
in 1908, or 87 per cent., this increase in revenue in eight years
being as great as the entire increase in the previous thirty-five
years.
But in this same period of eight years there was an increase
of $100,600,000, or 93 per cent., in Postoffice Department
expenditures, of which only $10,900,000, or 11 per cent., was paid
to the railroads, $33,935,000, or 34 per cent., going to Rural Free
Delivery, $25,000,000, or 25 per cent., to postmasters and their
clerks, and the balance to other items.
The following statement shows for the year 1895 and for the years
1899 to 1908, inclusive, postal revenue and postal expenditures
divided between amounts paid the railroads, cost of rural delivery
and other expenditures:
REVENUE. EXPENDITURES.
Paid Rural
Year. Railroads. Delivery. Other. Total.
1895 $ 70,983,000 $31,189,000(a) $ -- $57,637,000 $ 88,826,000(a)
1899 95,021,000 35,775,000 150,000 65,607,000 101,632,000
1900 102,355,000 37,315,000 420,000 70,005,000 107,740,000
1901 111,631,000 38,161,000 1,778,000 75,616,000 115,555,000
1902 121,848,000 39,519,000 3,998,000 81,269,000 124,786,000
1903 134,224,000 41,377,000 8,102,000 89,305,000 138,784,000
1904 143,583,000 43,971,000 12,682,000 95,709,000 152,362,000
1905 152,827,000 45,482,000 20,824,000 101,093,000 167,399,000
1906 167,933,000 46,953,000 24,774,000 106,543,000 178,270,000
1907 183,585,000 49,831,000 26,643,000 113,754,000 190,238,000
1908 191,479,000 48,155,000 34,355,000 125,842,000 208,352,000
(a) Includes $1,646,741 accrued in favor of Pacific Railroads in 1895,
but not charged to postal expenditures.
The railroads are themselves large contributors to the revenues of the
Postoffice Department. It is ascertained that nine roads, covering
27,500 miles, pay annually $261,000 for postage stamps, or at the rate
of $2,000,000 for the entire railroad mileage of the country.
The next statement shows clearly that the ratio of expenses to
receipts of the Postoffice Department would in 1908 have been but 91
per cent. and no deficit but for the expenditures made for Rural Free
Delivery, the amount paid the railroads being now only 25 per cent.
of the total revenue as compared with 41 per cent. in 1895.
RATIO OF EXPENSES OF POSTOFFICE DEPARTMENT TO POSTAL REVENUES
1895-1908.
Percentage Percentage Percentage
of Postal Rev. Paid to Paid to
Year. Paid to R'ys. Rural Free Del. Other Expenses. Total.
1895 41 0 75 116
1899 38 0 69 107
1900 36 0 69 105
1901 34 1 69 104
1902 32 3 67 102
1903 31 6 66 103
1904 31 9 66 106
1905 30 14 66 110
1906 28 15 63 106
1907 27 15 62 104
1908 25 18 66 109
In order to avoid a deficit, attention has been concentrated on this
25 per cent. of the postal expenditure, which we contend is at least
not an unfair compensation to the railroads for services rendered.
Though the proportion of the total revenue going to the railroads has
fallen one-third in ten years, the deficit still remains, and is it
reasonable to suppose that any reduction in railway mail pay would
not be speedily absorbed in other directions? On the contrary, ought
not efforts be concentrated to bring within reasonable figures the
other expenses of the Department, which now absorb 84 per cent. of
its revenue as compared with only 69 per cent. in 1900--despite an
actual growth in postal revenue in the same time of $89,000,000, or
87 per cent.?
It will be noted from these figures that a reduction of 10 per cent.
in the ratio of railway mail pay to total revenue can be entirely
wiped out by an increase of only 3 per cent. in other postal
expenses, whilst a retrenchment of 10 per cent. in the latter would
have put the Department almost on a paying basis, notwithstanding
the heavy cost of Rural Free Delivery. From 1895 to 1908 actual
totals show that the railroads' pay has increased 54 per cent. for
handling 114 per cent. more mail tonnage, whilst in the same period
other expenses of the Postoffice Department have grown 178 per cent.,
revenues increasing 149 per cent.
Increased mail business means a direct increase in postal revenue,
as postage remains the same regardless of tonnage, but carrying
this increased business on the part of the railroads means less
proportionate revenue to them according to volume of tonnage, so that
the proportion of the postal revenue they now receive is very much
less than formerly. Labor, material, and the price of everything sold
in commerce have advanced materially, as we all know, in the past
seven or eight years; railway mail pay being practically the only
thing that has decreased in the face of conditions that should have
raised it.
As a large increase in mail tonnage means to the Postoffice
Department about an equal increase in revenue with a decreased
payment per ton to the railroads through lower rates, the avoidance
of a deficit would seem not a difficult matter if other postal
expenses were kept at least within sufficient control, so they would
not increase faster than the increase in volume of mail handled.
The Postoffice Department enjoys this peculiar advantage of receiving
with the growth of the country an increase in revenue directly in
proportion to the increase in business handled. In disbursing this
revenue, it must pay less to the railroads in proportion to the
density of business, thus retaining to apply on other expenses a
larger net revenue year by year. It is reasonable to suppose that
the cost of many branches of the Department should not increase in
the same ratio as tonnage of mail (for example, that expenses of
individual postoffices and administrative and general expenses should
not grow in this proportion). Yet, regardless of these favorable
influences, expenditures in other directions have absorbed the
great net revenues after paying the railroads, and it is in these
directions that the cause of the postal deficit must be looked for.
The growth of these expenditures, which since 1900 has been much
faster than the rise in mail tonnage, is shown in the following
comparison of 1908 with 1898:
1908. 1898. Increase. Pct.
Ton mileage of mails handled
by railroads 484,683,135 272,714,017 211,969,118 78
Postal revenues $191,478,663 $89,012,619 $102,466,044 115
Less paid to railroads 48,155,379 34,379,227 13,776,152 40
Net applicable to other
expenditures 143,323,284 54,633,392 88,689,892 162
Other expenditures 160,196,507 63,654,297 96,542,210 152
Deficit 16,873,223 9,020,905 7,852,318 87
Per ton of mail handled by railroads (cents)--
Postal revenues 39.5 32.6 +6.9
Paid to railroads 9.9 12.6 -2.7
---- ---- ----
Net applicable to other items 29.6 20.0 +9.6
Other expenditures 33.1 23.3 +9.4
---- ---- ----
Deficit 3.5 3.3 +0.2
Note.--The increase in gross postal revenue per unit of mail
handled by railroads is no doubt due to increase in city mail
not handled by railroads.
Chicago, Ill., March 1, 1909.
THE DIMINISHED PURCHASING POWER OF RAILWAY EARNINGS
BY C. C. MCCAIN.
Chairman of the Trunk Line Association, New York, 1909; Formerly
Auditor Interstate Commerce Commission.
INTRODUCTION.
The ten years or more which have elapsed since the resumption
of industrial activity that began some time in 1897 have been
characterized by changes in rates of wages for substantially all
kinds of labor, and in the prices of most commodities which amount
to a profound and material alteration in the value of money. Wages
of railway labor, prices of railway materials and supplies and
prices of commodities carried by railways and of those produced by
the purchasers of railway transportation have rapidly increased.
This is equivalent to a decrease in the value of the money in which
railway charges are paid _for the appreciation of commodities is the
depreciation of money_. Commodities cannot have generally augmented
value without money having diminished value. Railway rates have not
been adjusted to this diminished value of money. The involuntary and
unsolicited reduction in railway rates has gone so far as seriously
to threaten the stability of railway wages and that of the whole
railway industry. Some adjustment through compensatory advances
in money rates (_i. e._, nominal rates) is, therefore, absolutely
necessary. The extent of the changes which have taken place, their
relation to the problem of railway rates and the adjustments which
they have made necessary are set forth in the following pages.
TYPICAL UNCHANGED RATES.
A fifteen-ton car-load of fourth class freight carried all-rail
between Chicago and New York at any time during the year 1897 would
have brought the railways transporting it $105.00 in gross receipts.
There has been no change in the class-rates between Chicago and New
York since 1897 and the same quantity of freight, classified in the
same way, produces the same gross receipts now that it did in 1897.[E]
The rates between Chicago and New York, as is very well known, are
the basis of all rates in the region north of the James, Potomac
and Ohio Rivers, and east of the Mississippi River and of a large
proportion of the rates applicable to traffic originating or destined
to any point in that region. Without a change in rates between
Chicago and New York there could have been, during the continuance of
the system of rate adjustment that has been in force since long prior
to the year 1897, no general change in the rates based upon those in
force between those cities.
WAGES OF RAILWAY EMPLOYEES.
More than forty per cent. of the gross receipts of the railways of
the United States are expended in the payment of employees, the sums
annually paid out for that purpose since 1897 being as follows:
Amount paid to
Year. employees.
1897 $465,601,581
1898 495,055,618
1899 522,967,896
1900 577,264,841
1901 610,713,701
1902 676,028,592
1903 (a)776,321,415
1904 817,598,810
1905 839,944,680
1906 (a)927,801,653
1907 1,072,386,427
---------------
Total $7,781,685,214
(a) Includes $19,000,000 estimated for Chicago, Milwaukee & St. Paul
in 1903 and $27,000,000 for the Southern Pacific in 1906.
It is a matter of common knowledge and of frequent comment that
a given sum of money will now buy very much less in labor or
commodities than it would in 1897. The change has been gradual but
substantially continuous and the aggregate result has been enormous.
The consequence of this change has worked great hardship to those
whose incomes have not been adjusted to the changed purchasing power
of money but fortunately the rates of wages of nearly all workmen and
the prices of practically all products of labor expended upon farms
or in factories or otherwise have been raised sufficiently to more or
less completely offset it. The principal sufferers are those salaried
employees whose salaries have not been readjusted and those whose
incomes are received under contracts covering long periods of time or
are derived from the marketing of commodities or services at prices
more or less effectively controlled by custom or statute. Many of the
owners of railway bonds are in the second class and all interstate
railways are, as to the disposal of their services, in the third
class.
As already noted, the gross revenue derivable by the railways from
the transportation of a carload consisting of fifteen tons of fourth
class freight between Chicago and New York is the same now that it
was in 1897--_i. e._, $105.00. But $105.00 is worth much less to any
railway now than it was in 1897 for money is worth at any time what
it will buy at that time. The reports of the Interstate Commerce
Commission show the following increases in rates of average daily
wages paid to railway employees:
Wages per day.
Class of Employees. -------------------------
Increase,
1897. 1907. per cent.
Station agents $1.73 $2.05 18.50
Other stationmen 1.62 1.78 9.88
Enginemen 3.65 4.30 17.81
Firemen 2.05 2.54 23.90
Conductors 3.07 3.69 20.20
Other trainmen 1.90 2.54 33.68
Machinists 2.23 2.87 28.70
Carpenters 2.01 2.40 19.40
Other shopmen 1.71 2.06 20.47
Section foreman 1.70 1.90 11.76
Other trackmen 1.16 1.46 25.86
Switchmen, flagmen and watchmen 1.72 1.87 8.72
Telegraph operators and despatchers 1.90 2.26 18.95
Employees, account floating equipment 1.86 2.27 22.04
All other employees and laborers 1.64 1.92 17.07
The foregoing affords a means of ascertaining the real value of
$105.00 of railway gross receipts in 1897 and 1907 and the decrease
from the earlier to the later year. The following table shows the
number of days labor of each of the different classes of railway
labor which $105.00 would buy in each of the years indicated:
Number of days labor
purchasable for $105.00.
Class of Employees. ------------------------
Decrease,
1897. 1907. per cent.
Station agents 60.7 51.2 15.65
Other station men 64.8 59.0 8.95
Enginemen 28.8 24.4 15.28
Firemen 51.2 41.3 19.34
Conductors 34.2 28.5 16.67
Other trainmen 55.3 41.3 25.32
Machinists 47.1 36.6 22.29
Carpenters 52.2 43.8 16.09
Other shopmen 61.4 51.0 16.94
Section 61.8 55.3 10.52
Other trackmen 90.5 71.9 20.55
Switchmen, flagmen and watchmen 61.0 56.1 8.03
Telegraph operators and despatchers 55.3 46.5 15.91
Employees, account floating equipment 56.5 46.3 18.05
All other employees and laborers 64.0 54.7 14.53
---- ---- -----
Average -- -- 16.27
The foregoing shows that on the average the gross railway receipts
derived from the service assumed as the basis of the calculation
would purchase 16.27 per cent. less of the necessary services
of railway employees, in 1907 than in 1897 and what is true of
the receipts from this service is true of every dollar received
by a railway--that is, no railway dollar will pay for more than
eighty-four per cent., on the average, as much railway labor as it
would in 1897.
The change in railway rates necessary fully to offset this decrease
in the value of the money in which rates are paid would amount to an
apparent advance of 19.43 per cent, of the money rates now in force.
COST OF FUEL FOR LOCOMOTIVES.
Next to labor the principal single item of expense incurred in the
operation of the railways of the United States is for the fuel
used in their locomotives. The expenditures for this purpose now
constitute about eleven per cent. of the cost of operation and since
1897 have been as follows:
Cost of fuel
Year. for locomotives.
1897 $65,044,670
1898 72,469,777
1899 77,187,344
1900 90,593,965
1901 104,926,568
1902 120,074,192
1903 146,509,031
1904 158,948,886
1905 156,429,245
1906 170,499,133
1907 200,261,975
--------------
Total $1,362,944,786
Thus, from 1897 to 1907, the cost of fuel for locomotives, in
spite of the economies in its use partially suggested by the
contemporaneous increase in the train-load of freight from 204.62
to 357.35 tons, or 74.64 per cent., increased 207.88 per cent.,
while passenger traffic increased but 126.15 per cent. and freight
traffic by 148.69 per cent. Thus while there was one dollar spent for
locomotive fuel in 1897 for each $17.25 of gross railway receipts
the ratio had declined by 1907 to one dollar for locomotive fuel for
each $12.93 of gross receipts--a difference which must plainly be
productive of profound changes in the proportion of gross receipts
remaining after the payment of necessary operating expenses. The
average prices of coal, per ton of 2,000 pounds, at the mines, in the
several states, in the years 1897 and 1907, as given by the United
States Geological Survey, were as follows:
Price per ton.
-----------------------------
Increase,
State. 1897. 1907. per cent.