The United States rail industry came up in 1827, after the formation of the Baltimore and Ohio Railroad company (Williams 2004). This company was the first to be chattered as a carrier for both passengers and freight. With time, the railroad gained importance during the settling of North America. This introduction to the people made it possible for the agricultural industry to develop greatly. Before long, several railroads had emerged, which made it possible for rail transport to expand its reach (Williams 2004). People therefore stopped over-relying on water and road transportation, since they now had more options. This industry has continued to evolve over the decades, and it is currently one of the most used means of transport in the US.
The rail transport industry comprises of railroad companies, railroad equipment manufacturers, and railroad service providers [ CITATION Boo10 \p 56 \l 2057 ]. Despite numerous setbacks, the industry has remained one of the most influential in the transport sector. The industry is a major source of employment to various people worldwide. These positions can either be found in rail transportation or rail support. The employment positions provided in the industry have a greatly contributed to the overall revenues generated in the US economy.
The rail transportation sector is usually involved in activities such as the movement of goods and people, consumption of goods and services produced by other industries, employment generation, and revenue production [ CITATION Har04 \p 43 \l 2057 ]. The various services in transportation offered include provision of private transportation, hiring out freight carriers, freight forwarding, and provision of logistics.
The rail industry is a great facilitator and supporter of both employment and business development. Millions of people gain employment in areas such as manufacturing, maintaining, and modifying train bodies so as to ensure that they are safe enough for both human and goods transportation [ CITATION Boo10 \p 132 \l 2057 ]. One out of every seven jobs is rail transport related. Rail transportation related occupations such as freight agents, freight-movers, and goods carriers make up a sizeable portion of the jobs generated from the rail industry.
The rail industry has had very many developmental changes over the past couple of years. These changes have contributed greatly to the economy. New projects that improve on efficiency of the system have been coming up from all sides, and most of them have a direct impact on the workforce. Since new projects require a lot of manpower to implement, a lot of jobs have continuously been created in both the construction and maintenance departments. Cheap labour has been a major stimulant to the development of this industry, especially when it was starting out. Slaves and convicts were the main labourers during construction back then [ CITATION Boo10 \p 67 \l 2057 ], but nowadays, compensation is much better.
The rail industry provides both permanent and casual jobs. Freight transportation is one of the major contributors in this industry, whether it provides direct or indirect employment opportunities. In the U.S, railroads employ about 177,000 workers, and most of them are unionized [ CITATION Eva04 \p 29 \l 2057 ]. The average total compensation given to them is approximately $80,000. Therefore, these workers are the country’s most compensated. Other contributing industries are equipment manufacturing, repair and service, rail road construction, and trains and parts dealers [ CITATION Eva04 \p 112 \l 2057 ].
There is a very strong link between transport investments and economic performance and growth. [ CITATION Eva04 \p 102 \l 2057 ]. Billions of dollars are invested annually in the maintenance and improvement of the railway system in order to benefit both passenger and freight transportation. The Federal Highway Administration (FHWA) promotes economic research so as to understand the link between national economic goals and highway investments [ CITATION Int09 \p 36 \l 2057 ].
Every year, billions of dollars go into maintenance and improvement of freight transportation, but the revenues generated take care of that. Freight railroads contribute an average of $265 billion annually to the economy in the US alone [ CITATION Int09 \p 48 \l 2057 ], which is no small contribution. These continuous investments have led to massive evolution changes over the years.
Carrier freight railroads in the US are divided into 4 classes [ CITATION Har04 \p 66 \l 2057 ]. Class 1 carriers contribute revenues of about $277.7 million and 89% of the rail industry’s employment base [ CITATION Har04 \p 67 \l 2057 ]. In the seven carriers making up Class 1, there are more than 46,000 employees. Regional railroads generate revenue of about $40 million [ CITATION Har04 \p 68 \l 2057 ]. Most of these railroads provide employment to about 500-600 workers. These railroads operate between two and four states.
Local line haul carriers bring in about $30 million annually [ CITATION Eva04 \p 89 \l 2057 ]. These carriers cover short distances, and only serve one state. On the other hand, switching and terminal carriers have the primary function of supplying switching and terminal services. There main focus is delivery and pick up services within a specific area. They serve line haul carriers, in exchange for a fee [ CITATION Boo10 \p 55 \l 2057 ]. These carriers can handle hundreds of thousands when it comes to carloads, and bring in $10 million annually in revenues. (This information is demonstrated in appendix 1 in the references section).
Freight railroads spend most of their revenues on maintenance and capital expenditures related to equipment and infrastructures [ CITATION Int09 \p 54 \l 2057 ]. These massive investments are meant to ensure that railroads offer safe, cost-effective, and high quality service to meet the needs of the nation. However, this had some negative impact on labour, since many people lost their jobs as a result of application of technology and restructuring of the industry.
Many governments have contributed to the development of the railway industry. This contribution is mainly in the form of loans, exemption from taxes, government ownership, and donations [ CITATION Int09 \p 108 \l 2057 ]. This assistance stimulates the construction of the railways, which results in economic development.
The government is responsible for regulating policies that govern the railway companies so as to reduce chances of monopoly-abuse. The Interstate Commerce Act (1887) convened the Interstate Commerce Commission (ICC), which was meant to regulate railway transportation economically [ CITATION Int09 \p 81 \l 2057 ]. These regulations include fare regulation, service regulation, financial regulation, and entry regulation. These rates and fares have to be approved by the ICC. Aspects such as accounting systems and mergers are also controlled [ CITATION Int09 \p 93 \l 2057 ].
The US railway industry has greatly benefited from deregulation. Freight traffic rose to 41.7% in 2001, and return on investments increased to 6.1% in 2004 [ CITATION Eva04 \p 45 \l 2057 ]. According to the Freight Analysis Framework (FAF), freight volumes are likely to rise by an additional 70% by 2020 [ CITATION Eva04 \p 51 \l 2057 ]. FAF predicts that there will be an increase in the percentage of Interstates ferrying 10,000 or more trucks, from 27% to 69% [ CITATION Eva04 \p 60 \l 2057 ].
Between 1990 and 2001, rail transport was the main proprietor in the freight market, as compared to other contributors in the industry. The market share for rail transportation has grown to 33%, as compared to 28% in the ‘90’s [ CITATION Har04 \p 37 \l 2057 ].
The General Equilibrium Approaches (GEA) helps in analyzing the economic contribution of improvements in the transportation network [ CITATION Int09 \p 87 \l 2057 ]. GEA measures the benefits gained from technological changes and regional specializations. GEA also emphasizes on the fact that geography determines which sections develop more than others.
Rail transportation is a major facilitator for regional specialization during the production of goods and services [ CITATION Boo10 \p 42 \l 2057 ]. When a region concentrates on producing a specific type of goods, it is able to produce them in bulk at a cheaper cost. These benefits are better experienced if the production costs outweigh the transportation costs. Therefore, the quality and cost of transportation is quite imperative. Moreover, trade increases when transportation becomes reliable and cheaper.
New technologies implemented in rail transport have contributed to broad changes in the industry. The use of IT and telecommunications in freight transportation has increased the ability to synchronize shipments over lengthy distances, which translates into lower costs, and thus influencing global production systems, whereby components and inputs are sourced internationally [ CITATION Int09 \p 117 \l 2057 ].
Sufficient funding is required to maintain existing rail transport infrastructure, and also to invest in upcoming technologies. Therefore, it is imperative to carry out investment analysis so as to develop future strategies. This is necessary so as to bridge the gap between transportation capacity and freight demand. Information concerning the relationship between the country’s GDP and freight transportation investment is also required during the analysis [ CITATION Int09 \p 131 \l 2057 ].
Therefore, investors, taxpayers, and policymakers should be provided with the relevant information so as to know what level of spending is necessary to capitalize on public benefits and transportation system productivity. For this to happen, decision makers must incorporate high quality analytical tools. The FHWA is therefore responsible for providing the decision makers with the materials needed to prioritize future projects and make wise investments [ CITATION Eva04 \p 106 \l 2057 ].
As portrayed above, the rail industry is a great influence in the American economy. If properly financed and regulated, it can continue being one of the major revenue contributors in the country. Moreover, if the rail industry is maintained, it will keep providing employment opportunities to thousands of workers countrywide, which translates to better living standards, and consequently, uplift the economy. Therefore, the government should seek to ensure that the industry performs at its peak so as to ensure that the industry’s contribution to the economy is not affected.
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