The textbook response of drivers wages and employment quickly following

The textbook response of drivers wages and employment

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The "textbook" response of drivers' wages and employment quickly following deregulation may be unique to the motor carrier industry, but the trucking experience is likely to be representative of the long-run labor market effects of deregulation in the other previously regulated industries.
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1 I. Introduction The motor carrier industry provides what in many ways is an ideal setting to evaluate the effects of regulation and subsequent deregulation on labor employment and earnings in what is a naturally competitive industry. The trucking industry includes a large number of companies, important segments of the industry are characterized by low capital and entry costs to firms, and, because worker skills are acquired quickly, labor supply is highly elastic. Entry and rate regulation by the Interstate Commerce Commission (ICC), coupled with the emergence of a powerful trade union (the International Brotherhood of Teamsters), resulted in the capture and maintenance of labor rents by drivers. At the same time that the motor carrier industry was subject to strict entry and rate regulation, however, many shippers had the ability to escape direct ICC regulation through the use of unregulated private carriage (i.e., own-company employment of drivers). The standard economic model provides reasonably clear-cut predictions regarding the effects of deregulation on employment and wages in a previously regulated industry. If rents were being realized under regulation, wages in previously regulated sectors should decline relative to those in unregulated sectors and relative to wages received by similar workers doing comparable levels of work elsewhere in the labor market. If union power were the principal vehicle for the capture of regulatory rents, then deregulation should result in a decline in union wage premiums, unless there existed substantial nonunion rent sharing, in which case both union and nonunion wages would decline following deregulation. Union density should decline, as long as unions continue to acquire rents for their members. Sectoral or union wage differentials that survive in the long run are likely to reflect some combination of rents and compensating differentials associated with worker skills and working conditions. The expected effects of deregulation on employment are less clear. On the one hand, if deregulation leads to lower labor and shipping costs, there will be an unambiguous increase in traffic, leading to increased employment for a given production technology. If deregulation also eliminates route inefficiencies associated with regulation, shipments should expand even more. On the other hand, if regulation locked-in labor-intensive production technologies or facilitated union-management bargaining (explicit or implicit) over employment as well as wages, then the initial effects of deregulation might be a
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2 decline in employment, even in the face of increased traffic. Deregulation should also be associated with a
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  • Spring '18
  • medther
  • Test, 1984, Nonunion, Wage labour

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