CEO PERSPECTIVES, RAILWAY AGE APRIL 2025 ISSUE: Freight rail remains the backbone of the nation’s transportation system, seamlessly linking industries, businesses and consumers. New analysis from AAR economists transforms abstract concepts into concrete evidence, demonstrating the critical role rail plays in uniting every link of the supply chain. Amid evolving market pressures and technological advances, rail’s commitment to innovation and strategic reinvestment continues to set it apart as a powerful force in modern logistics.
In 2023, the industry generated $233.4 billion in economic output, a figure comparable to the entire GDP of Kansas. This substantial contribution highlights the industry’s extensive reach in the supply chain and economy writ large, supporting sectors like agriculture and manufacturing and reinforcing its critical role in driving national overall growth. There is much to be said about uncertainty in the supply chain currently, fighting a bevy of headwinds, but rail and its private investments remain constant.
In 2023, Class I railroads reinvested $26.8 billion into modernizing tracks, upgrading equipment and enhancing safety. These investments ensure that rail remains a reliable, cost-effective, and high-capacity link in the supply chain, allowing businesses to plan efficiently while reducing the risk of delays and disruptions. Unlike other freight modes that rely on taxpayer-funded infrastructure, railroads own, operate, and maintain their own networks, saving billions in public spending while ensuring long-term economic resilience.
AAR’s analysis also shows that the industry directly employs 153,000 workers and supports 749,000 total jobs across the economy—nearly twice the size of Washington D.C.’s entire labor force. Ever the force multiplier, every railroad job creates about four additional jobs in sectors such as logistics, manufacturing and technology—growing fields and a key part of domestic prosperity. Nearshoring or other goals of current policymakers will—simply put—be impossible without rail serving as the ballast of the economy.
Rail companies and their employees sustain communities. These high-paying jobs drive economic stability, contributing $66 billion in household income and $14.1 billion in Railroad Retirement benefits annually, strengthening both consumer spending and regional economies.
Every $1 invested in rail drives $2.50 in total economic activity, fueling industries that depend on seamless transportation networks. Railroads also generate $25.1 billion in annual tax revenue, helping fund infrastructure, public services and local economies.
All of which brings us back to the question at hand, which for AAR specifically, means charting a sensible, data-driven policy landscape that can sustain the prowess of rail and empower it to grow in the future.
At the heart of this is technology, which is further strengthening rail’s role in global logistics. Real-time GPS tracking, predictive analytics, and AI-driven scheduling optimize routes, reduce congestion, and improve delivery times. By integrating with trucking and port operations, rail enables supply chains to function more efficiently, ensuring goods reach their destinations on time and at a lower cost.
Yet railroads have encountered unnecessary obstacles in recent years at the U.S. Department of Transportation (USDOT) to improving safety and efficiency through technology. With change comes opportunity, and AAR will advocate for outcome-driven rules and regulations. Whether expanding the use of automated track inspection or modernizing the waiver process, USDOT can correct past mistakes.
Looking at this Congress, which is tasked with reauthorizing the surface transportation law, AAR will also help its members add value in the supply chain by working to correct modal inequities. Trucks, while the largest customer of railroads, are also their biggest competitor and don’t fully cover their highway costs, creating an uneven playing field. The Tax Foundation notes that underpriced roads push more freight onto highways, undermining the largely unsubsidized rail network. With declining gas tax revenues, AAR will continue to push Congress to shift to a weight- and distance-based system and phase out the gas tax. Lawmakers initiated this in the last transportation bill, but USDOT has stalled the national pilot program, which should be moved forward to support broader adoption.
The stability of the economy depends on reliable, cost-effective freight transportation, and rail is uniquely positioned to provide the long-term solutions businesses need. As global trade continues to shift, supply chains will demand greater efficiency, flexibility and investment in transportation infrastructure. A policy environment that supports rail’s ability to modernize, expand intermodal connections and drive innovation will be essential to maintaining U.S. economic leadership.
Freight rail delivers real economic value—driving trade, supporting jobs, reducing costs and strengthening global supply chain efficiency. By continuing to invest in technology, infrastructure and workforce development, rail will remain the most efficient, reliable and cost-effective freight solution for a rapidly evolving global economy.
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