The testimony was delivered by UTU Associate General Counsel Dan Elliott as part of a Surface Transportation Board examination of railroad deregulation, which began 25 years ago with the passage of the Staggers Rail Act in 1980.

"There is no dispute that the Staggers Rail Act improved rail profits and service quality by relaxing restrictions on pricing and easing abandonment procedures," the UTU said.

"These improvements helped the rail industry move from the brink of disaster at that time back to good health over the past 25 years. For this, UTU is obviously thankful since its members' jobs and wages would have been at risk if the industry had collapsed as is evidenced by the present situation in the air industry.

"However, throughout this period of prosperity, it seems that the supporters of the Staggers Act have forgotten why many of the gains to the rail industry occurred during this time period. The biggest cost decrease was achieved on the backs of the employees. Rail employment dropped precipitously from 457,000 workers on Class I railroads to fewer than 200,000 today.

"With this major decline in employment and some modest output growth, labor productivity increased significantly. In essence, the Staggers Act seemed to take money from the working men and women in this industry and move it into the pockets of the mega-railroads, who were struggling at that time.

"The focus of the Staggers Act obviously was on rates; yet it was somehow turned on its head to give the rail industry a free crack at its labor force under the guise of deregulation.

"It become the prevailing rail industry theory that markets in which Class I railroads were less able to operate track profitably might produce profits for smaller, non-union local carriers. By creating short-line and regional railroads out of this less profitable track of the Class I railroads, local rail service began to be preserved, by using non-union labor and the more flexible rate structure.

"In 1982, the ICC decided not to impose the required labor protection on sales of lines by major railroads to non-carrier subsidiaries created by holding companies to purchase them. The ICC proceeded to exempt acquisitions of such lines from most regulation, ruling that employee protective conditions could be imposed only in exceptional circumstances in these types of lines sales.

"The ICC reasoned that with the elimination of labor protection in these transactions, sales of these railroad lines would increase greatly.

"This is the how and why line sales to non-railroad corporations intending to become railroads were immunized from income protection and resulted in the loss of many rail jobs without the customary labor protection.

"This loss of jobs was further compounded by the way the Staggers Act caused traffic on the major carriers to change. The new, lower rates gave shippers incentives to move their traffic to higher density lines between fewer terminals with longer trains and bigger shipments. This change allowed costs to be cut in labor since manpower was less intensive for this type of service. This also resulted in less stress by the major carriers on service on branch lines, which were then, as noted, sold off to short lines instead of being abandoned as in the past.

"In addition, because there was a relaxation in controls over entry and exit, the post-deregulation period has been marked by a significant development in mergers and acquisitions. From 56 Class I railroads in 1975, the number has been reduced to seven in 2005 (two of which are Canadian). This has generally resulted in job losses for labor.

"In sum, the general effects of the Staggers Act have improved the bottom line for rail carriers, which is good for the industry; however, much of this occurred at the expense of rail employees who are the backbone of this industry.

"This large-scale elimination of jobs has now come back to haunt the railroads. The UP-SP debacle in 1997 and other major traffic problems after mega-mergers have been because of a shortage of employees. Also, employees have struggled with fatigue because of these circumstances.

"The UTU now is somewhat hesitant to give any further support to changes to the rail regulatory system based on its past treatment by the railroads and the ICC.