Regulation, Unionization, and Racial Wage Discrimination: An Analysis of the Trucking Industry

I Introduction Deregulation of the motor carrier industry is a natural experiment to study the relationship between product market competition and wage discrimination. It provides a unique situation in which the market structure of a single industry changes dramatically in a short period, so that we can compare racial wages under the opposing market structure of each regulatory regime. Economic theory suggests that the intensified competition of deregulation would give employers and the union in the industry less latitude to engage in wage discrimination. In a recent study, Peoples and Saunders (1993) find that the wage differential between black and white track drivers in the lucrative for-hire sector of the industry declined following deregulation. In the consistently unregulated private carrier sector, the racial wage gap also declined, but by a smaller amount. The accepted rationale for these findings is that deregulation caused a more substantial reduction in the wage gap in the for-hire sector because the previous monopoly rents of regulation provided employers in this sector greater latitude to discriminate. Peoples and Saunders (1993) provide a thorough analysis of deregulation's impact on the racial wage gap in the industry. However, their analysis does not reveal the impact of increased competition on employers' and the union's latitude to indulge in wage discrimination for two reasons. First, it may be that racial convergence in driver characteristics following deregulation partially explains the decline in the racial wage gap in each tracking sector. Moreover, a reduction in wage discrimination would be indicated by a decline in the difference in returns to characteristics for racial groups following deregulation. Second, minority underrepresentation in high-wage union jobs may partially explain the wage differential in a tracking sector and regulatory period. Indeed, the International Brotherhood of Teamsters (IBT), the union that represents organized truck drivers, has a history of minority exclusion (Leone, 1970). Thus a reduction in the portion of the wage gap that is explained by racial differences in unionization indicates a decrease in the IBT's influence on wages in the industry. This article examines racial wages in the for-hire and private carrier sectors of the trucking industry prior to and following regulatory reform. We estimate earnings of truck drivers separated by trucking sector, regulatory regime, and racial group, and then we decompose earnings two ways. In our first decomposition we break down the racial wage differential in each trucking sector and regulatory period into the portions due to racial differences in driver characteristics, unionization, and returns to characteristics. We will argue that the latter two components capture indirect and direct employer and union discrimination in a sector and regime. This measurement is important because it gives insight into the role of product market competition in directly reducing wage discrimination, and an additional indirect reduction that may be effective in industries with racially exclusive unions. Such an analysis has policy implications when deciding the ability of government intervention as opposed to market forces to reduce discrimination. In a second decomposition, we break down the change in wages for each racial group over regulatory regimes into the portion due to changes in a group's attributes, rate of unionization, and returns to attributes. This decomposition reveals the sources of wage changes for a racial group following deregulation and gives insight into the redistribution of earnings when monopoly rents erode. We proceed as follows: Section II presents the background of the trucking industry and a discussion of wage discrimination. A description of the data is presented in Section III. In Section IV we discuss the methodology for estimating wages, the procedure for decomposing racial wage differentials in a regime and sector, and the decomposition of the wage change of each racial group following deregulation. …