Wage Differentials of Transportation Industries: Deregulation Versus Regulation

This article investigates the wage differentials of similar occupations in three for-hire transportation carrier industries, railroad, truck and motor bus, under regulation and deregulation. The estimation results indicate that the union wage gaps among all occupations have widened under deregulation. Specifically, the union wages of railroad occupations have increased relative to those of truck drivers and the union wages of truck drivers have increased relative to those of motor bus drivers. Further, wage gaps for all occupations for this period are greater among nonunion than among union workers. (JEL L92) I. INTRODUCTION Economic regulation of U.S. transportation carrier industries has been classified into three distinct eras: the monopoly regulatory era, the competition regulatory era, and the regulatory reform era, beginning in the late 1800s, the 1930s, and the 1970s (Talley, 1983). These eras addressed carrier abuses, destructive intramodal and intermodal competition, and the negative impacts of regulation, respectively. The 1887 Interstate Commerce Act sought to prevent monopolistic abuses and limit discriminatory practices of railroads. The Motor Carrier Act of 1935 of the competition regulatory era placed motor carriers (freight and passenger) under federal regulation. By the 1970s advocates for federal regulatory reform argued that economic regulation protected inefficient carriers, promoted high rates and fares, and in general fostered an inefficient allocation of resources. Subsequently, a number of deregulation (or regulatory reform) acts were passed, including the Railroad Revitalization and Regulatory Reform Act of 1976, the Staggers Rail Act of 1980, the Motor Carrier Act of 1980, and the Bus Regulatory Reform Act of 1982. Though shippers and passengers have generally benefited from transportation deregulation, paying lower real rates and fares, the impact on carrier labor earnings has been negative. For example, the real weekly wages of union railroad engineers have declined 11.7% (Talley and Schwarz-Miller, 1998); the real hourly wages of union and nonunion for-hire truck carrier drivers have declined 23% and 10% (Hirsch and Macpherson, 1998); and the real hourly wages of both union and nonunion for-hire motor bus carrier drivers have declined 17% (Schwarz-Miller and Talley, 1994). The impact of deregulation, however, on the relative labor earnings of transportation carrier industries is unknown. Specifically, have wage differentials changed from those of the regulation period? If so, have these differentials widened (narrowed) under deregulation, thereby increasing (decreasing) the gap in the labor earnings of one industry relative to those of another? Do the changes in wage differentials differ for union and nonunion labor ? The purpose of this article is to investigate occupational wage differentials among transportation industries under regulation and deregulation. As intermodal competition intensifies, such information is expected to play a more important role in industry wage negotiations. Wage differentials of similar occupations in three for-hire carrier industries under regulation and deregulation are estimated. The three industries are the railroad, truck, and motor bus industries, and the occupations include railroad engineers, conductors, and brakemen/switchmen; truck drivers; and motor bus drivers. The estimation results indicate that the union wages of railroad occupations have increased relative to those of truck drivers and the union wages of truck drivers have increased relative to those of motor bus drivers during the postderegulation period. Further, wage gaps for all occupations for this period are greater among nonunion than among union workers. The remainder of this article is structured as follows: section II discusses railroad, truck, and motor bus for-hire carrier industries, and in particular their labor, under regulation and deregulation. …