ALPHABETICAL INDEX ABANDONMENT, rather than lower wages, the ABILITY TO PAY AS A TAX THEORY- ABILITY TO PAY AS A WAGE FACTOR Of Short Lines-see Short Lines section (green Of Independently Represented Carriers-see Of Car Lines-see Refrigerator Car companies Of Express Agency-see Express Agency section A. Statements of the Parties 1. Ability of Railroad Industry to Pay b. Other Demands on Earnings 2. Ability of Individual Carriers to Pay B. Pronouncements of Prior Wage Boards Re- Page 6003 ABILITY TO PAY A. Statement of the Parties 1. Ability of Railroad Industry to Pay Responsibility to public. (Parmelee on Direct) Railway employes entitled to a share of the Railway employes, although a large part of the Page 1781 2617 2616-2617 2606-2608 2584 2408 2418 Anything which impairs earnings will make Statement of cash balances is not an index of 2637 1941-1942 1558-1561 1915 Organizations' position confusing. (Aronson in 6269 Labor does not share responsibility of manage- 5996-5997 ABILITY TO PAY A. Statement of the Parties 1. Ability of Railroad Industry to Pay c. Present Situation (Continued) Transit situation no reason for not paying employes adequate wages. (Mulholland). Interstate Commerce Commission, 55th annual report, cited: traffic thus created (from defense needs) is not the stuff out of which future railroad prosperity is likely to be built: (Parmelee on Direct).. (Hill on Direct).. Decision in Ex Parte 148 (March 2, 1942), cited: 1941 earnings "cannot however, be considered too high for a prosperous year following a long period of lean years.' (Parmelee on Direct)... Decision in regard to general commodity rate increases (1937), cited: fact that railroads cannot hope to earn a normal return in depression carries complementary principle that they should be given opportunity to earn more than normal return in prosperity. (Parmelee on Direct). If railroads earn little or nothing for long periods of time, there should be occasional years when they should enjoy more prosperity. (Aronson in Opening).. Present high earnings not sufficient Cannot be largely absorbed in increased wages without inviting financial disaster after war. (White, Roy B. on Direct). 1915 1705-1782 2627-2629 1706 1712 99 2371 2389 Financially strong railroads needed during both war and peace. (Parmelee on Direct) 1674-1675 Unemployment will follow war unless sufficient funds are available for maintenance and improvements. (White, Roy B. on Direct) Wage level which will permit continuation of business better than one which will dry business up. (Head on Direct). Major long term problem confronting railroads is permanent reestablishment of earning power. (Barriger on Direct).. 4570 1920 2. Ability of Individual Carriers to Pay Neither ability of most successful roads nor inability of bankrupt roads controlling. (White, Roy B. on Direct) Each carrier has right to individual consideration. (Miller in Closing).. Although each railway system is a separate unit unto itself, employes' financial exhibits have presented only composite figures. (Cross Examination of Homer).. "It is no settlement of a wage dispute for an Emergency Board to saddle upon a carrier a wage bill that the carrier cannot meet." (Miller in Closing). Ownership and control are not determinative of the wage level of employes: ABILITY TO PAY A. Statements of the Parties 2. Ability of Individual Carriers to Pay c. Present Situation (Continued) All carriers before Board dependent upon financial success of industry as a whole and Class I carriers in particular. (Mulholland in Closing). Roads presently without funds face ultimate abandonment and should surrender now instead of trying to preserve management equity. (Mulholland in Closing). B. Pronouncements of Prior Wage Boards Regarding Validity of Ability to Pay as a Wage Factor Arbitration award, Georgia and Florida R. R., 1914: employes have first claim on earnings. (Mulholland in Closing). Arbitration award, Engineers and 52 eastern railroads, 1912: smallness and weakness of roads cannot control wages. (Mulholland in Closing). Railroad Labor Board Decisions 1028, 1036 and 1074: Board pointed out that revenues had declined seriously during 1921 and facilities were badly in need of expansion, but denied that reduction was intended to shift cost of railway rehabilitation; Board stated that when carriers are back on their feet it would be possible to give increased consideration to scientific adjustment of the living and saving wage, free from complications of the abnormal period. (Employes' Exhibit 4, pp. 46–47.) (Cucich on Direct).. 5989-5990 6004 5998-5999 5997-5998 241 Arbitration award, Louisiana, Arkansas and Texas, 1933: ability to pay not a relevant factor in fixing wages. (Mulholland in Closing) 5999-6000 1938 Emergency Board: financial position relevant only if railroad wages are too high compared with wages in other industries. (Mulholland in Opening)...... Railroad wages should not ebb and flow with In proceedings, Chairman Stacy stated that it Various governmental bodies have not been in List of cases illustrating War Labor Board's recognition of ability to pay as a wage factor. (Miller in Closing). ABSENCE FROM HOME-some railroad employes working away from home not even privileged to go home over week-ends. (Jewell on Direct). See also Away-from Home Expenses ACCOUNTS AND ACCOUNTING (Continued) Of Car Lines-see Refrigerator Car Companies section (orange pages) Of Express Agency-see Express Agency section (blue pages) A. General Content of Railroad Accounts under I. C. C. Regulations B. Depreciation Accounting C. Effect of Transit Privilege Situation on Accounts See also General Accounting Office Statistics A. General Content of Railroad Accounts under I. C. C. Regulations Description of various railway income accounts. ACCOUNTS AND ACCOUNTING B. Depreciation Accounting (Continued) Accumulation of deferred maintenance has resulted in an over-statement of earning power in war years as well as during depression. (Barriger on Direct). Replacement which involves no element of betterment charged entirely to operating expense, even though cost of labor and material may have risen. (Barriger, Examination by Board). Any replacement of a structure or of piece of material with something better involves capitalization of additional cost of such betterment. (Barriger, Examination by Board).... In replacing worn-out rail with heavier rail or making other replacements which involve element of betterment under maintenance accounting, excess of cost of actual replacement over cost of replacement in kind but under current conditions is capitalized. (Barriger, Examination by Board). 1934 2037-2039 2017 2031-2034 (Homer on Direct)......... 1440-1444 2016-2040 account into the books for service yet to be rendered on which prepayment has been made. (Chairman). 1916 C. Effect of Transit Privilege Situation on Accounts B. Depreciation Accounting Relationship of depreciation reserve, surplus account, and net income account, and obtaining of new funds from outside, to problem of capital investment. (Barriger, Examination by Board).. Carriers have had depreciation accounting only in respect to motive power and rolling stock; depreciation rates fixed by carriers and reviewed by I. C. C. (Barriger, Examination by Board). Depreciation charges represent inclusion within operating expenses of cost of normal wearing out of property in excess of that replaced by maintenance. (Barriger, Examination by Board). Balances in depreciation reserve when unit of property is retired were formerly charged to equipment retirement account, but such account recently eliminated by I. C. C. and balances are charged directly into depreciation account. (Barriger, Examination by Board). Large balances in depreciation reserve account, resulting from large disparity between estimated depreciation and actual depreciation, referred to I. C. C. Bureau of Accounts for ruling as to whether they should be charged into current operating expenses or into profit and loss. (Barriger, Examination by Board).. Income account would be distorted if depreciation rates greater than those indicated by accounting and engineering facts were used for (Barthe purpose of securing capital funds. riger on Direct). (Examination by Board). ADDITIONS AND BETTERMENTS A. Period from First World War to Present War (Continued) Post-war capital improvement program demonstrated its worth during depression, for it enabled carriers to reduce both total and unit operating costs. (Parmelee on Direct). Justified by service during present war. (White, Roy B. on Direct)... Aggregate expenditures for equipment and other additions and betterments, 1923-1930: $6,742,000,000; 1931-1938: $2,070,000,000. (Parmelee on Direct)... Gross capital expenditures for additions and betterments since 1933: over $10,000,000,000. (Parmelee on Direct).. Net increase in road and equipment account, 1923-1941, was about half as great as gross expenditure for additions and betterments, difference being explained by retirement of property and abandonments. (Parmelee on Direct). During certain years, particularly 1930 and 1939, retirement of property was greater than gross additions and betterments. (Parmelee on Direct).. O'Fallon basis for rate-making valuation takes additions and betterments into account. (Homer on Cross).. Railroad mechanization has increased considerably since 1921. (Morton on Cross). Although great advances have been made in technical development of railway plant over last 20 years, too small a proportion of total investment is represented by the modern part of it. (Barriger on Direct). Carriers which were financially stronger during 1920's made capital improvements which represented a larger relationship to the industry's total than their proportion of mileage or property investment or gross revenues. (Barriger on Direct). B. Current Program and Wartime Difficulties Encountered Rising tendency in capital expenditures has developed since 1938, subject to limitations in obtaining equipment and other material in 1942 and 1943. (Parmelee on Direct)_____ 1942 railroad program was a reduced wartime program, not a normal peacetime one, but the attainment fell far short of even such curtailed program. (Parmelee on Direct). Equipment program, authorizations, and deliveries, 1942: 1725 2381 1677-1678 1724 1739-1740 1741 1577-1578 2552 1931 1951-1952 1726 1675 2380-2381 Duties of railroad executives: to public, to investers, to employes; and to maintain and improve plant investment. (Hill on Direct) 2615-2617 Railroads should be psychologically strong— free from uncertainty for the future, so as to enable rail management to plan and effectuate program of improvement for post-war competitive struggle. (Parmelee on Direct).. Present additions to railroad plant for handling war traffic will be useless or of little value after the war. (White, Roy B. on Direct).. Capital expenditure of at least $1,000,000,000 per year will be required for many years for adequate development and modernization of railroads in order to meet future competition successfully. (Barriger on Direct).. Estimate based on needs and opportunities for modernization which exist after a long period of time during which only subnormal property investment was made; does not indicate a net increase in book investment of that amount, because there would be heavy write-off of property retired. (Barriger on Redirect).. D. Source of Funds for Out of total financing for additions, betterments, and debt payments, 73% was from current funds in 1941 and 79% in 1942. (Parmelee on Direct). Financially strong carriers financed a greater proportion of total capital investment during 1920's from both security sales and net income than their mileage or gross revenue pro-rates. (Barriger on Direct).... Expenditures for extensions and improvements necessitated by present emergency are all charged into capital account but must be financed largely out of current net income or out of available cash. (Parmelee on Direct). 1920-1921 1955-1956 1753 1953-1954 0 1,900,000 tons (Parmelee on Direct)... 1727-1728 Expenditures for grade separations benefit public as much as railroads. (Hill on Direct) Railroads should expend $1,000,000,000 per year in additions and betterments, of which onethird should come from depreciation and retirement charges included within operating expense, one-third from surplus net income available for re-investment, and one-third from capital securities. (Barriger, Examination by Board). 2017 Cost of steam locomotives: $100,000 to $150,000 per unit; cost of freight cars: $3,500 to $4,000 apiece. (Parmelee on Direct)..... Net expenditures for additions and betterments $1,029,450,000, 1941-1942. (Parmelee on Direct). Property investment increased 1940-1942 approximately two-thirds of the net increase in additions and betterments. (Parmelee on Direct).. The war is impeding the betterment of the railroads whereas it is accelerating the development of much competition. (Barriger on Direct).. 1733 |