Part 15
With the better understanding of the problem of the railroad by the public through and in connection with the special boards represented here today, it might not be amiss to express the hope that such needs as cannot be met without the active support of public opinion and perhaps legislation will be clearly brought out. One of the thoughts that occurs to me was suggested by a recent exhibit, from the records, of the loss of life, damage to railroad property, as well as injury to persons and property conveyed, due to the presence of unauthorized persons upon railroad property, whether wilfully or carelessly trespassing. As an illustration of its seriousness: during last year over 5,000 trespassers lost their lives on railroads besides a large number injured. Numerous mishaps have been traced to acts of trespassers, which may be the secret of many unexplained casualties. The railroads are a highway for the migration of tramps and unemployed persons, who commit petty depredations, jeopardize the safety of trains and the lives of employees and passengers. It seems of no avail that thousands of the worst class are arrested by railroad police forces and convictions secured, as the sentences in the majority of cases serve rather to aggravate, than to mitigate, the evil. One line arrested over 9,000 trespassers during the past year, and secured convictions in 75 per cent of the cases; but in half of them sentence was suspended, which usually meant that the offender used the railroad to escape from the scene. I do not wish to be understood to asperse the administration of justice, nor to insist that offences of a serious character are always committed by railroad trespassers, but the hazard involved is one that should not be permitted to exist, the railroad property destroyed or damaged bearing no relation to the risk of persons and property transported, and to the enormous loss of life involved.
I feel that the attention of those accustomed to broadly viewing problems of public concern should be brought to bear upon these facts, with the hope that measures may be taken to insure greater safety in this respect, as well as to save the waste of life and property now resulting from or incident to the practice. I might venture to suggest that the loss of life is far greater than entailed through decades by boiler explosions or rear-end collisions, the seriousness of which I do not wish to deprecate; and the situation might warrant special record of the facts being obtained in behalf of the public through the regular channels.
Wherein lies the increased safety of the future may perhaps be the query in many minds. It is universally sought.
It would be mere conjecture on my part, and, with your indulgence, I am not inclined to prophesy. As I see it, the great problem is to make our progress sure, taking no doubtful measures, adopting no specious devices which may appeal to us at first blush until we have satisfied ourselves that no greater risk is involved by the change.
The multiplication of rules enjoining obedience, together with devices for additional protection, may yield a false sense of security if fundamental obedience to existing rules and efficiency of existing appliances is one bit impaired by the addition. We must not embrace paper reforms, even though clamor and pressure be great. An "ounce of prevention is better than a pound of cure," we grant, but reverse the proverb, and the pound of prevention may over-whelm us. The public official would seem to be in a judicial position, mindful of public justice and safety, basing his judgment and acts upon facts alone. Improvement in general safety and character of railroad operation must be the product not only of an enlightened public opinion and the conservative wisdom of public representatives, but progressive and careful management, coupled with a sense of discipline and responsibility and industry of railroad employees, who must jointly share the obligations of the problem.
Speaking of the compliance we have cheerfully made to the suggestions of the public representatives--the Commissions--in regard to improvements of service, facilities and conditions of operation, etc., we believe in the long run that these things mean a better standard and greater security for railroad property, as well as the enormous benefit that accrues to the public by reason of proper and efficient railway service, and we have only thoughts of admiration for the attitudes of the Commissions as we have found them. They have a large problem. We are glad to avail ourselves of their wisdom, and believe it to be the means whereby the responsibility of the carriers to the public is secured, and through whom the responsibility of the public to the railroads must be voiced.
Gentlemen, I thank you for your kind attention, and the favor, which I acknowledge, of being permitted to address you as best I may upon a subject to which we are all devoted. In the absence of a distinct literature on the subject that your worthy President assigned to me, my efforts are perhaps a bit crudely devised, having no pattern. In another generation we may perhaps evolve a distinct species of railroad statesman and an encyclopedia from which we will be able to point back to the beginnings and the efforts at mutual advice, and to the growth and knowledge that have ensued, just as we have seen the day of small things in railroads to be the beginning of a constant growth to the wonders of today. I am sure that the American people can congratulate themselves upon an institution of the character of your Convention and of your several honorable bodies, and trust that this meeting will be such that you will feel that you have made definite progress in your concurrent aims.
RAILWAY MAIL PAY
BY
JULIUS KRUTTSCHNITT,
DIRECTOR OF MAINTENANCE AND OPERATION OF THE UNION PACIFIC SYSTEM AND SOUTHERN PACIFIC COMPANY.
The question of compensation to the railroads of the United States for carrying the mails has been under review before Congress at different times during the past ten years. The subject was exhaustively investigated by a Joint Commission of the Senate and House of Representatives in 1898 and 1899, which reached the following conclusion after full consideration and taking of a mass of testimony on all sides of the question:
"Upon a careful consideration of all the evidence and the statements and arguments submitted, and in view of all the services rendered by the railroads, we are of the opinion that the prices now paid to the railroad companies for the transportation of the mails are not excessive, and recommend that no reduction thereof be made at this time."
(See Report 2284, House of Representatives, 56th Congress, 2d Session.)
This Commission also concluded as to the pay for railway postoffice cars:
"Taking in view all these facts as disclosed by the testimony filed herewith, we are of the opinion that the prices paid as compensation for the postal car service are not excessive, and recommend that no reduction be made therein so long as the methods, conditions and requirements of the postal service continue the same as at present."
Since the above recommendations were made, the operating costs on railroads, and, consequently, the cost of handling the mail, as hereafter shown, have been largely increased, through higher prices for both material and labor, so that if the railways were not over-paid ten years ago, the present rates, being lower than those paid at that time, would be too low and should really be increased to give the railroads a reasonable return. Far from doing this, legislation enacted in the past few years has had the effect of cutting down the mail pay of the railroads, whilst the special requirements as to service and equipment have been made more severe and exacting.
Recent acts of Congress or orders of the Postoffice Department, which have the force of law, that have caused reduction of railroad revenues, are the following:
1. Act of Congress of March 2, 1907, reduced pay on all routes moving in excess of 5,000 pounds per day. This reduced the pay for handling mails $1,740,494.63, or 3½ per cent. of the total earnings. The same act reduced the rental rates for railway postal cars $935,974.09 per annum, or 16 per cent. The total reduction in pay to the railroads under this act was $2,676,468.72, or 6 per cent. of the total compensation for both classes of service.
2. Act of Congress of June 26, 1906, effective July 1, 1906, withdrew from the mails empty mail bags and certain supplies, to be thereafter shipped as freight or express. It may be conservatively estimated that the annual loss in mail revenue to the railroads by withdrawing these shipments from the mails is at least $1,000,000, with practically no reduction in space furnished because of this change.
3. Order of Postmaster-General of June 7, 1907, changing with each mail weighing thereafter the method of computing average weights on which pay is based from that always previously used and theretofore regarded as the proper interpretation of the law. The effect of this on the mail weighings of 1907 and 1908 was to reduce railway mail pay in two sections of the country, $2,222,108.92, or 9½ per cent., or at the rate of $4,500,000 per annum for all roads of the country.
4. Orders of Postmaster-General reducing railway postal car pay by allowing "shorter-car" pay on certain lines than heretofore authorized and changing certain full lines to half lines; that is, reducing pay for return movement, thus causing an annual loss to the railroads of $345,287.06. (Second Assistant Postmaster-General's Annual Report 1908, page 13.)
The effect of all of these reductions on the mail revenue of the railroads aggregate $8,500,000 per annum, or 17 per cent. of the total pay received by them in the year ending June 30, 1908, for handling the mail and furnishing railway postal cars.
These reductions were made without justification and for the purpose of reducing railroad revenues--and, incidentally, the expenses of the Postoffice Department, at a time when the net earnings of the carriers seemed large to the public mind, although under these favorable conditions the returns to the shareholders approximated but 4 per cent., whilst farmers were receiving 10 per cent., manufacturers 15 per cent. and National banks 18 to 20 per cent.
It is true that there has been a large increase in the gross revenue of the railroads in the last ten years, but this has accrued from traffic other than carriage of the mails and has been accompanied by great increase in operating expenses. In fact, were it not for the economies of the carriers, effected by the use of more powerful locomotives and larger freight cars, the increase in operating expenses would, without doubt, have fully neutralized the growth in revenue. In the months preceding the panic of October, 1907, the railroads were quite generally showing decreases in net earnings in face of the largest gross earnings in their history. It was costing them much more than a dollar to handle every dollar increase in gross earnings.
Since the hasty enactment of ill-considered legislation reducing mail pay, the revenues of the roads have been seriously affected by a change in business conditions which has reduced traffic without reducing prices of materials and labor. At the same time, legislation has increased labor costs by reducing hours of service.
In 1898 rates for transporting the mails were too low to cover the cost of service, they are much too low now, and the losses on the mail service as a whole--there are some routes that pay--are borne by freight traffic entirely.
RECEIPTS FROM MAIL AND OTHER RAILROAD TRAFFIC.
The latest statistics of operations of all railroads of the United States are for the year ending June 30, 1907, issued by the Interstate Commerce Commission, July 9, 1908. From them we compile the following exhibit comparing results of 1907 with 1898--when a Commission of Congress, after complete investigation of the subject, recommended that mail rates be not reduced.
Pct. Pct. Year ending June 30th-- 1907. 1898. Inc. Dec.
Earnings from passengers $ 564,606,343 $266,970,490 111 -- Earnings from express $ 57,332,931 $ 25,908,075 121 -- Earnings from mails $ 50,378,964 $ 34,608,352 46 -- Earnings from freight $1,823,651,998 $876,727,719 108 -- Operating expenses $1,748,515,814 $817,973,276 114 -- Passenger train mileage 541,439,176(a) 341,526,769 58 -- Freight train mileage 662,106,857(a) 503,766,258 31 --
(a) Including mixed trains.
Earnings per passenger train mile (cents): Pct. Pct. 1907. 1898 Inc. Dec.
From passengers 105.7 79.4 31 -- From express 10.7 7.7 38 -- From mails 9.4 10.3 10 ----- ---- -- -- Total 125.8 97.4 29 -- Number passengers carried per train 51 39 31 -- Tons of mail carried per train .86 .80 7 -- Earnings per freight train mile (cents): Earned from freight 274.0 173.1 58 -- Tons of freight carried per train 357.35 226.45 58 -- Operating expenses per total train mile (cents) 147.0 95.6 54 -- Net earnings per train mile (cents): Passenger trains 21.2 (Loss) 1.8 Freight 127.0 77.5 64 -- Passenger earnings per passenger mile (cents) 2.014 1.973 2 -- Mail earnings per mail ton mile (cents) 10.66 12.57 -- 15 Freight earnings per freight ton mile 0.759 0.753 1 -- (cents)
Note.--Bear in mind these figures do not, of course, show effect of cut of $8,500,000 in mail pay effective July 1, 1907, or losses in net revenue through depression in business conditions commencing in latter part of 1907. As an index of the latter, the Commercial and Financial Chronicle of September 5, 1908, showed that 141 roads, aggregating 168,839 miles or 70 per cent. of all roads in the country, had suffered a loss of $63,484,902, or 24.97 per cent., in net earnings in the first half of the calendar year 1908, as compared with same period of previous year.
The foregoing statement clearly shows the difference between the revenue obtained from passenger trains as compared with freight trains. The control of the former is largely out of the hands of railroad operating officers, as to meet competitive and traffic conditions, heavier and more luxurious passenger cars must constantly be furnished, which, of course, means largely increased expense with very little increase in the paying train load. In fact, as to the mails, notwithstanding an increase in tonnage carried on the average train, the mail earnings per passenger train mile were actually less in 1907 than in 1898, due largely to the automatic reduction of railway mail pay per ton mile. Considering the freight train mile, the composition of which is almost entirely within the control of the railroads, which institute methods for reducing cost of transportation, it will be observed that by such methods the railroads have been enabled to place 58 per cent. more tonnage in a train, bring them 58 per cent. more earnings, which can be applied as an offset to the increase of 54 per cent. in the cost of running a train one mile.
This increase in operating expenses per train mile last referred to has been brought about largely because of the increased cost of labor and materials, which, as is well known, has been general throughout the country.
Comparing results of operation of all railroads of the United States 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.