Railroad Employment Projections

Pursuant to a congressional request, GAO reviewed the Railroad Retirement Board's (RRB) rail employment projections and the assumptions RRB used in making such projections from 1981 through 1983.

GAO found that RRB does not use or consider all the data it might in developing estimates and does not use econometric models such as those used by some forecasting organizations. RRB officials said that they base their employment projections on "educated guesses" which consider past industry trends and the economy. Rail employment forecasts made by other Federal agencies and industry groups have been considerably higher than actual employment and, although the agencies used econometric forecasting models, their projections were no better than those made by RRB. However, one nonprofit research organization, the National Planning Association, was able to project rail employment more accurately than RRB and other agencies. In preparing its estimates, the association performed a detailed analysis of variables affecting the rail industry and developed an econometric forecasting model. A comparison of RRB and association forecasts for the next 5 years showed that RRB generally projects lower rail employment. GAO believes that the current RRB estimates provide a reasonable basis for estimating short-term payroll tax revenues available for benefit payments. However, over the longer term, the reasonableness of these estimates is uncertain. The relative accuracy of the association forecast suggests that using a well-constructed econometric model could assist RRB in making accurate rail employment projections.