and canals, which also enjoys subsidies, shows a trend similar to that of motortrucks. The ratio increased from 1930 to 1940, declined during the war, and has since increased substantially. The Great Lakes, on the other hand, have lost ground since 1930. Oil pipelines, a specialized carrier of one commodity, have greatly increased their relative share of the total traffic. carriers are, up to the present time, a comparatively small but rapidly growing factor in the freight transportation field.

Air

A further decline in the railroad proportion of the total commercial intercity freight traffic took place in 1953. Presently available statistics indicate that the ton-miles of freight handled by the railroads showed a decline of 1.4 percent in 1953 under 1952, while reports of the American Trucking Associations show that for-hire motortrucks handled about 10 percent more business in 1953 than they did in 1952.

In table VII, corresponding statistics are shown for commercial intercity passenger traffic. The railroad ratio fell from 68.5 percent in 1930 to 64.5 percent in 1940, rose sharply to 73.9 percent in 1943, due to war demands, and has since fallen to 48.8 percent in 1952. Buses, which handled 18.1 percent of total intercity passenger traffic in 1930, showed an increase to 33.8 percent in 1950, but dropped to 30.3 percent in 1952. Air carriers handled only 0.2 percent of the intercity load in 1930, but this grew to 2.8 percent in 1940, fell back to 1.4 percent in 1943, and has since increased to 17.9 percent in 1952.

Passenger-miles handled by the class I railroads in 1953 were 7 percent under 1952. On the other hand, there was a further increase in airline travel of nearly 18 percent.

These statistics make it abundantly clear that the railroads are operating in a highly competitive field. The nature of the competition may be more fully understood when it is pointed out that the traffic which the trucks handle pays them about 5.5 cents per ton-mile compared with the 1.5 cents per ton-mile paid by railroad traffic. The airlines receive 5 cents per passenger-mile, or almost double the railroad average.

The figures of commercial intercity passenger travel shown by table VII do not include private automobile travel which has increased by leaps and bounds since the twenties. The Interstate Commerce Commission has estimated that in 1952 about 410 billion intercity passenger-miles were accounted for by private automobiles, or more than 12 times the number of passenger-miles handled by the railroads in that same year.

WAGE RATES AND MATERIAL PRICES

The two principal items in railroad operating expenses are wages and the cost of materials used in daily operation. Out of every dollar of railroad operating expense, 63 cents goes for wages and 27 cents is paid for fuel, material, and supplies.

A reason for the lag in net earnings is the fact that wage rates and material prices have increased to a much greater relative extent than have the average revenues which the railroads receive for performing 1 ton-mile and 1 passenger-mile service. Tables VIII and IX show the increases that have taken place since 1939 in these basic cost factors of railroad operation.

Table VIII shows statistics of railroad employees and their compensation over the period 1939 to 1953. Between the years 1939 and 1953 railroad employment increased 22.1 percent, total compensation paid employees increased 185.7 percent, and the average straight-time rate of hourly pay increased 155.3 percent. Table IX shows in column 1 the index of railroad fuel, material, and supply prices, based on 1947-49 equals 100. That is the same base period now used by the Bureau of Labor Statistics for purposes of its index of wholesale prices, consumer price index, and others. Between 1939 and 1953, prices paid by the railroads for fuel, material, and supplies increased from an index of 52.0 to 122.0, or by 134.6 percent.

In column 2 of table IX, the average straight-time rate of pay of railroad employees is shown on the basis of 1947-49 equals 100. In column 3 the two indexes (prices and wages) are combined, weighted in accordance with the ratio of each to total operating expenses. This composite index of material prices and wage rates increased from an index of 55.2 in 1939 to an index of 137.1 in 1953, or by 148.4 percent.

In contrast to the increase of 148.4 percent in material prices and wage rates since 1939 has been the increase of only 51.9 percent in average revenues for ton-mile of freight and of 44.5 percent in average revenues per passenger-mile.

Thus, the relative increases in the principal elements of unit costs have been approximately three times the relative increases in unit revenues.

Table X shows the ratio of wages and salaries to the value of sales (operating revenues) for the railroads and a number of leading manufacturing industries, for the years 1952 and 1939. It will be noted that in 1952, wages and salaries took a far greater proportion of the gross revenues in the railroad industry than in manufacturing industries. The ratio for railroads was 50.4 percent compared with 22.8 percent for all manufacturing.

Moreover, this gap has been widening over the past 13 years. Between 1939 and 1952 the impact of wages on revenues for all manufacturing increased seventenths of 1 percentage point-from 22.1 percent to 22.8 percent. For the railroads, however, the increase was 3.8 percentage points, more than 5 times the increase experienced by manufacturing generally. Thus, the gap that already existed between the railroads and manufacturing in 1939 has since widened, and this again emphasizes the seriously narrowing margin of profit on which the railroads now operate.

THE RAILROAD FINANCIAL SITUATION

Association of American Railroads Bureau of Railway Economics,

Washington, D. C.

TABLE I.-Operating revenues, net railway operating income, and rate of return, railways of class I in the United States, 1925–29 and 1941 to 1953

Includes investment in road and equipment (after deducting accrued depreciation and amortization of defense projects) plus material and supply inventories and cash. Average as of beginning and end of year.

TABLE II.—The downturn in railroad traffic and earnings, railways of class I in the United States

Week ended:

Jan. 2..

Jan. 9..

Jan. 16.

Jan. 23.

Jan. 30.

Feb. 6.

Feb. 13.

Peb. 20.

Feb. 27.

Total.

TABLE III.-Revenue carloadings, 9 weeks ended Feb. 27

Period

Total for corresponding 9 weeks of―

1953.

1952..

1951

1950

1949.

1948

1947

TABLE IV.-Ratio net income to net assets of leading corporations, 1925-29 and

NOTE.-Net income is taken as reported, after depreciation, interest, taxes, and other charges and reserves, but before dividends. Net assets includes book value of outstanding preferred and common stock and surplus account at beginning of each year.

Source: National City Bank of New York.

TABLE V.-Ratio of net earnings to total operating revenues, railways of class I in the United States, 1925-29 and 1941 to 1953