^Q^^H
HD28
.M414
ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
LABOR RENT-SHARING AND REGULATION:
EVIDENCE FROM THE TRUCKING INDUSTRY
Nancy L. Rose
MIT
Revised September 1986
Sloan School of Management Working Paper:
#1828-86
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
LABOR RENT-SHARING AND REGULATION:
EVIDENCE FROM THE TRUCKING INDUSTRY
Nancy L. Rose
MIT
Revised September 1986
Sloan School of Management Working Paper:
#1828-86
This paper is a substantially revised version of an earlier worl<ing paper,
number 1683-85 (July, 1985).
am grateful to Orley Ashenfeiter, Henry
Farber, Wallace Hendricks, James Poterba, Lawrence Summers, and seminar
participants at Chicago, Columbia, MIT, Pennsylvania and Yale for helpful
conversations and comments.
thank Henry Farber, Wayne Gray, and the
National Bureau of Economic Research for assistance with the CPS data.
This
Lars Bespolka and Anne Grfin provided excellent research assistance.
research was begun with financial support from a National Science Foundation fellowship and a Sloan foundation grant to the MIT economics
department.
I
I
M.I.T. L'
MAR
'
1
a
lyd/
RECEIVED
LABOR RENT-SHARING AND REGULATION:
EVIDENCE FROM THE TRUCKING INDUSTRY
Nancy
Rose
L.
MIT
September 1986
An increasing body
While there
claimant to firms' profits.
rent-sharing,
evidence suggests that labor may be an important
of
is
a
well-developed literature on union
recent empirical and theoretical work suggests that nonunion
workers also may capture
an exogenous reduction
share of rents.
a
trucking industry rents to estimate the extent of union
in
and nonunion rent-sharing.
economists interested
This study uses wage responses to
The
results should be of interest to both labor
noncompetitive theories of wage determination and
in
regulatory economists interested
in
assessing the magnitude and distribution of
regulatory rents.
The paper evaluates wage responses
1970s and early 1980s.
The
over nonunion wages as
a
dropped from an average
to
motor carrier deregulation
results indicate substantial declines
consequence
of 50
of regulatory
reforms.
in
billion for
union premie
Union premia
Data for nonunion
the industry indicate wage declines relative to economy-wide average
wages, although the magnitude
The
the late
percent over nonunion wages during the 1973-78
period, to 30 percent over nonunion wages during 1979-84.
workers
in
in
1983 annual loss
in
of
nonunion rents
is
aggregate union rents
not precisely quantified.
is
estimated at $657 to $1.2
union employees of the 886 largest regulated trucking firms.
These
results suggest that union workers captured 60 to 70 percent of total industry
rents,
and provide strong support for labor rent-sharing hypotheses.
Increasing evidence suggests that labor may be an important claimant to
firms' profits.
to
capture
(1984),
a
Most studies
share of rents.
in
this area
have analyzed the
For example,
ability of labor unions
Ruback and Zimmerman
Clark (1984),
and Salinger (1984) use cross-sectional data on firms or
to estimate the effect of unionization on profitability.
lines of
business
More recent theoretical
and empirical studies by Dickens (1986), Dickens and Katz (1986a, b), Krueger and
Summers (1986a,
b),
and Rotemberg and Saloner (1986) provide support for
noncompetitive models of wage determination
in
the nonunion,
These analyses suggest that rent-sharing may extend
sector.
workers, although they do not provide direct tests
The importance
economics literature.
of labor
union,
nonunion
to
effect.
rent-sharing extends well beyond the labor
For example,
analyzing government regulation.
understanding rent-sharing
is
essential to
Regulatory protectionism can create rents over
which workers and firms may negotiate;
firms'
of this
as well as
regulatory profit constraints may distort
labor input decisions or alter firms' relative bargaining strength vis-a-vis
unions; the political nature of regulatory agencies can expand the scope of
potential
games between firms and workers.
collective bargaining patterns
number
of authors,
in
The extent
of union
rent-sharing and
regulated industries have been explored by
including Hendricks (1975,
a
1977) and Ehrenberg (1979), for
Dickens and Katz (1986a, b) and Krueger and Summers (1986a, b) report
substantial dispersion in wages across industries, holding constant occupation
and worker characteristics. They find high correlatations of industry wage
differentials across occupations, countries, and union and nonunion workers.
Theoretical models that predict nonunion rent-sharing include Dickens (1986)
model of union threat effects and Rotemberg and Saloner's (1986) game-theoretic
model of wage determination for unorganized workers.
may
Failure to account for these effects
example.
lead to underestimates of
regulatory rents and distortions.
Examining wage responses to exogenous reductions
caused by regulatory reforms, can provide
My
nonunion rent-sharing.
several reasons provides
First,
a
a
in
rents,
strong test of both union and
analysis focuses on the trucking industry, which for
fertile
ground
for evaluating rent-sharing hypotheses.
previous work has documented the existence of monopoly rents
carrier industry,
Interstate
and linked these
to
responses to reductions
in
a
regulatory reforms
Second,
in
the motor
in
the late
natural experiment that allows us to observe wage
these rents.
Finally,
a
single,
very powerful union--
the International Brotherhood of Teamsters--represents almost
workers
in
economic regulation of the industry by the
Commerce Commission (ICC).
1970s and early 1980s provide
the heavily unionized for-hire trucking industry.
increase the bargaining power of organized labor
at
such as those
the very least, the industry should provide
a
in
all
unionized
This tends to
trucking, and suggests that,
strong test of union rent-sharing
Hendricks (1975) analyzes electric utilities' relative bargaining
Hendricks (1977) investigates
strengths in different regulatory environments;
occupational wage patterns across regulated and unregulated industries; and
Ehrenberg (1979) discusses the effect of regulatory constraints and political
influences on collective bargaining, focusing on telecommunications in New
York.
In addition, Hendricks, Feuille, and Szerszen (1980) and Card (1985)
analyze interactions between regulation and collective bargaining in the
airline industry; Arnold (1970), Annable (1973), Hayden (1977), and Moore
(1978) discuss potential Teamster Union rents in their investigations of
trucking regulation.
^
Card (1985) and Hendricks et al. (1980) explore the impact of airline
They find only limited
deregulation on unionized labor in that industry.
effects from deregulation, although Hendricks et al. note that this may be a
result of substantial union power combined with a bargaining structure that
impervious to regulatory changes.
^
^ See Moore (1978,
1986),
Frew (1981), and Rose (1985a), for example.
is
3
This paper uses wage responses to motor carrier deregulation to estimate the
The
extent of labor rent-sharing.
two sections
first
union wage responses to motor carrier deregulation
contracts for indications of changes
The contracts
in
of
the paper concentrate on
Section
examines union
I
bargaining outcomes after deregulation.
reveal substantial differences between settlements before and after
the Motor Carrier Act of 1980, with contracts
in
1982 and 1985 specifying
considerably less favorable terms for union workers relative to historical patterns.
However,
it
is
benchmark wage behavior.
Aggregate earnings data indicate
unionization rates.
I
a
decline
average
in
the wage level from
a
therefore evaluate union wage behavior against
a
trucking wages, but cannot distinguish
in
evidence without reference to some
difficult to interpret this
a
decline
in
decline
nonunion trucking wage benchmark.
Section
II
Surveys (CPS)
uses data from the Bureau of the Census
Current Population
wage premia over nonunion wages
to estimate union
through 1984 period.
s
for the 1973
Because these data span the period before and after
trucking deregulation, they can be used
differentials to regulatory reform.
The
to
examine the response
of
union wage
results indicate declines in the average
union wage premia from 50 percent of nonunion wages during the early to mid1970s,
to
30 percent after deregulation.
union driver
in
1983-84 were
at
Annual earnings for
least S2200,
or 8 percent,
"representative"
a
less
than they would
have been had the regulatory union wage differential been maintained.
Nonunion rent-sharing
wages
in
economy
tion on
is
the trucking industry
as a whole.
evaluated
is
in
compared
section
III
to that of
The behavior
of
nonunion wages, and hence on possible nonunion rent-sharing.
in
nonunion
average wages for the
This analysis provides evidence on the impact
results indicate some decline
of
nonunion trucking wages relative
to
deregula-
The
economy-wide
4
average wage levels.
Although this effect
some support for models
The
of
is
not precisely quantified,
in
provides
nonunion rent-sharing.
implications of these results for aggregate labor rents
industry are developed
it
section
IV.
in
the trucking
5
I.
Union Rent-sharing:
Contract agreements provide
effect of regulatory
a
natural starting point for evaluating the
in
the trucking industry since 1964.
changes, as well as
in
wage
levels.
a
These
(NMFAs) specify wage increases and bene-
"National Master Freight Agreements'
contract period.
The Teamsters Union has
reforms on union-firm relations.
negotiated national agreements
fits
Contract Evidence
broad range of work rules, ower each three-year
Supplements
The union
to the
NMFA
allow for local and regional variations
number
also negotiates a
commodities agreements, which apply to firms
in
of
separate specialized
the least unionized sectors of
The National Master Freight Agreement
the motor carrier industry.'^
extensive of these various agreements:
is
the most
about 75 percent of the Teamsters'
375,000 to 400,000 freight division members
in
the mid-'1970s were covered by the
NMFA.
Identifying the timing of regulatory reforms
is
critical
to
evaluating their
effect on
union wages and contract terms.
Deregulation of the trucking industry
began
earnest during the
of
in
fall
administrative reforms (see Rose,
and winter
I985a1.
1978,
with
a
series of ICC
The movement toward administrative
"deregulation" intensified over 1979; congressional action
in
this
area culminated
in
June 1980 with approval
of
industry indicators show the effects of increased competition as early as 1979,
of
the Motor Carrier Act of 1980
Although
a
number
''These include four conference-wide "Iron and Steel and Special Commodity
Riders," a national "Automotive Transporters Agreement,' and a number of
These
contracts governing tank truck carriage and the household good industry.
agreements were a response to the increasing use of nonunion owner--operators by
specialized commodity carriers
in
the 1950s and 1960s.
r
the bulk of the impact appears
regulatory reform, the
"deregulation" periods.
NMFAs
1980 and beyond.
in
deregulation was clear,
preceding
it
than
it
chronology of
The regulation period covers contracts signed through
Because the 1979
one caveat.
this
can be separated into "regulation" and
The deregulation period includes the
1976.
Based on
it
may
NMFA was
look
more
1979,
1982,
and 1985 agreements, with
signed before the outcome of
like
the regulation-era contracts
looks like the post-1980 agreements.
For this reason, the
1979-82 contract may be considered "transitional".
Table
1
NMFAs signed from
highlights the provisions of the six
As the table indicates, the 1982 and 1985 agreements represent dramatic
1985.
The 1982 contract
departures from the earlier pattern of contracts.
general wage increase over the
life
of the contract,
(COLA) adjustments under the contract
contributions to benefits funds.
to be diverted to pension
and
COLA
in
employer
The only wage change over the contract
47 cents per hour increase specified by the 1979
cents per hour
called for no
provided for cost-of-living
health/welfare (benefits) funds, and provided for no other increases
a
1970 to
NMFA.
was
life
This was part of
a
72
that the 1979 contract deferred to 1982; the remaining 25
Employers agreed to provisions
cents per hour was diverted to benefits funds.
Moore (1986) looks at a number of industry indicators, including a sample
of truckload and less-than-truckload rates, average revenues per ton-mile,
return on transportation investment, entry applications and number of regulated
A number of these
carriers, average employee compensation, and many others.
series show changes beginning in 1978 or 1979; however, the larger effects are
usually found in 1980 or 1981.
It is,
however, difficult to disentangle the
role of deregulation from general economic conditions in assessing the determinants of the price, revenue, and rate-of - retu rn reductions that Moore's
series show in 1979.
n
The table focuses on changes in hourly wages to facilitate interpretaThe NMFAs also specify increases in mileage rates for approximately
tion.
100,000 over-the- road drivers that are paid on
basis
.
a
mileage rather than hourly
CD
<
8
protecting union jobs from being transferred to nonunion workers, and Teamsters
agreed
to relaxation of
some worl< rules.
The 1985 contract introduced
it
number
Although
of additional concessions.
provided for contract wage increases for current full-time employees
($1.50/hour over the
a
a
Q
life
of the contract,
The base
cut 17 percent, to $11.00 per hour.
for lower
wages during the
of the full-time rate
Finally,
the
NMFA
which 93 cents was considered
first
during the
rate for casual
and part-time employees was
The wage structure
for
new hires provided
three years of employment (at 70%, 80%,
first,
second, and third years,
and 90%
respectively).
contract terms overstate the union's compensation package
National bargaining was substantially
the industry.
be
to
the agreement sharply reduced wages for part-time
cost-of-living adjustment),
employees and new hires.
of
weakened
in
in
the 1980s, as
Increasing numbers of employers sought--and obtained--individual concessions from
their local or regional union.
A substantial number
refused to sign the 1982 or 1985
of
these smaller companies
NMFA.^
Negotiators for both sides attributed these radical departures from historical
contract terms to the effects of deregulation on the industry.
brought with
number
of
it
increased entry and price competition.
Deregulation
This led to
a
surge
in
nonunion companies, and coupled with the 1981 recession, resulted
the
in
deteriorating financial conditions for large numbers of unionized carriers and
unemployment for
as
many
as 20 to 30 percent of the Teamsters' freight division
The most significant work rule concession was to permit over-the- road
drivers to make local deliveries.
This was part of various supplemental
agreements, and was not included in the NMFA itself.
Lieb (1984) reports that the number of companies participating in the
1982 agreement had fallen to 284, from almost 500 in the early 1970s, and that
the number of employees covered by the NMFA had declined by 30 percent.
These conditions induced the union and trucking firms
members.
November
to
1981
reopen the 1979 contract, even though
to
The resulting contract was approved and
run.
Continued deterioration
of
liave
employees recalled
in
fall
to
had five months
it
in
left
place by March 1982.
in
summer
the
of
This
1983.
reduced wages for part-time employees and laid-off
work.
Although the union membership rejected the proposal
quite similar provisions eventually were embodied
1983,
agree
industry conditions led trucking management and union
leadership to agree on further concessions
agreement would
in
to
in
the 1985
contract.
The 1982 and 1985 National Master Freight Agreements suggest
lation
disrupted the historical pattern of union wage-setting
industry, and led to substantial concessions
this
evidence
is
not decisive.
in
the trucking
union wage levels.
in
that deregu-
Unfortunately,
Although recent union contracts appear
to
been strongly concessionary, this conclusion depends on what settlements
Some sort
of
For example,
if
counterfactual state would have been.
measure
NMFA wages
the same pattern as
is
necessary.
NMFA wages, one would
to
industries.
1
benchmark against which
the
to
economy-wide wages exhibited
in
trucking.
measure wage movements
trucking industry relative to wage movements
in
not wish to conclude that
deregulation accounted for the wage reductions
One possible benchmark would be
have
in
in
the
comparable, but non - regulated
examine wages for three reference groups:
manufacturing, mining.
These figures are based on Teamster estimates, which may be subject to
substantial error.
See the U.S. General Accounting Office's (1982) report
(hereafter, GAO (1982)).
As noted above, the 1985 contract lowered wages for part-time employees
and new hires, but did not reduce wages for recalled workers.
The 1985
contract was challenged on the grounds that part-time workers were excluded
from voting, but was settled and in force by June 1985
10
and construction.
Aggregate data on average hourly earnings for these groups
and the trucking industry generally support the conclusions suggested by the
Figure
union contract terms.
plots the
1
for the four groups from 1971
movement
of
Wages
through 1984.
in
roughly together with mining and construction earnings
average hourly earnings
the trucking industry move
until
1980.
After 1980,
trucking wages decline, both relative to mining and construction wages, and
absolutely
in
in
Of course, these findings do not necessarily imply that wages
1983.
the trucking industry have declined.
nonunion workers,
a
decline
average earnings even
if
the trucking industry.
has two main advantages.
truck drivers
I
union workers earn more than
the proportion of unionized workers could reduce
union wage levels were unaffected.
An alternative approach
in
in
If
is
measure union wages against nonunion wages
to
This comparison
First,
behavior relative to nonunion wages
in
the focus of the next section.
reference group
this
am most interested
is
analyzing.
in
to quantify the effects of deregulation.
is
quite similar to the union
Second, looking
the industry proves
One caution
is
It
a
at union
wage
straightforward way
urged, however.
If
deregulation reduced nonunion wages, then this reference point may understate
the ability of the Teamsters Union to capture regulatory rents,
understate the effect of deregulation on union wages.
and consequently
11
FIGURE
1
COMPARISON OF AVERGE HOURLY EARNINGS
;:^
71
72
TRUCKING
73
7Z
75
76
77
+ MANUFACTURING
78
79
80
MINING
B
1
82
83
8^
85
A CONSTRUCTION
En^rloNinent and
Source:
U. S. Department of Labor, Bureau of Labor Statistics.
TCP u earnings
Earnings
Annual average hourly earnings reported for 1971-83.
are from July; 1985 earnings are from June.
Manufacturing, mining, and
construction data are from September 1985 issue, Table C-1, and August 1985
issue, Table C-1.
Trucking data are from Table C-2, various issues.
.
12
CPS Evidence
Union Rent-sharing:
II.
This section uses microdata from the Current Population Survey (CPS) to
quantify changes
union wage behavior over time.
in
The CPS provides
infor-
mation on large samples of workers (necessary to obtain adequate subsamples of
truck drivers) and
is
available over
sufficiently long period of time to permit
a
analysis of union premia before and after trucking deregulation.
status information are available on the
1984,
May CPS
with the exception of the 1982 survey,
Wage and union
for each year from 1973
for which
through
union status information
was not collected.
Although the data set has numerous shortcomings (see
Freeman (1986) for
a
discussion), these features make
attractive for the present
it
investigation.
A.
Methodology
Wages are
likely to be a function of four factors:
workers' characteristics
including union status, firm characteristics, occupation and industry specific
effects,
and geographic wage
The May CPS provides information on most
levels.
of these.
Available data on worker qualities include union status, education,
sex,
and marital status.
race,
truck drivers (frequently
in
Because women comprise
the
trucking industry.
(owner-operators).
wage variation
via
I
to full-time
who work
in
2
of
percent),
control for industry and occupation effects
truck drivers employed
This excludes non-driver employees
as well as truck drivers
very small fraction
CPS samples, and never more than
they are excluded from the sample.
by restricting the sample
a
age,
in
in
the for-hire
the trucking industry,
private carriage and self-employed drivers
Data on worker location are used to control for geographical
regional fixed effects.
13
Unfortunately, the
CPS
typically does not provide information on the firms
employing the responding individuals.
characteristics
may
small firms typically
1
2
The
bias the estimated union
inability to control for firm
wage
For example,
differential.
if
pay lower wages, ceteris paribus, because nonunion drivers
the trucking industry are more likely to work for smaller
may cause the estimates
to
firms,
overstate the union wage premium.
1
omitting firm size
"^
This suggests
that one should use caution interpreting the level of the estimated premium,
although this potential bias should not invalidate tests
nf
changes
in
union premia
through time.
The CPS data are used
to estimate a
conventional semi-log wage equation of
the form:
1
9
Supplements occasionally gather data on workers
for example, the May 1979 Pension Plan Supplement.
in
•
establishments;
see,
Mellow (1983) investigates the firm size effect on wages, and finds that
estimated union wage differentials are smaller in the presence of controls for firm
used data from the May 1979 CPS Pension Plan
characteristics, notably size.
Supplement to test the significance of this effect in the trucking industry.
Although the point estimates suggest that larger firms tend to pay both higher
nonunion wages and higher union premia over nonunion wages, the small sample
Due to the large standard errors of the
size makes statistical inference difficult.
estimates, statistical tests would not reject the restriction that wages levels and
union premia are constant across firm size in the trucking industry.
In addition to firm size, differences in firm markets may affects estimated
differentials.
For example, the inability to distinguish workers employed in the
more profitable less-than-truckload (LTL) sector from those employed in the more
competitive, less unionized, and less profitable specialized commodity sector may
The inability to exclude United Parcel (UPS) employees, who
distort the results.
negotiate a separate contract and who realized slightly better terms than the
NMFA in their 1982 contract, may bias estimates against a decline in the
deregulation union premium.
I
Freeman and Medoff (1984) discuss other potential sources of bias in
cross-sectional estimates.
However, even if the level of the differential were
of
overstated by the use
cross-sectional data without adequate controls for all
worker and firm characteristics, there is no reason to expect the bias to change
in such a way as to substantially reduce estimated union wage differentials over
time.
Indeed, the rapid growth of new, smaller nonunion firms in the 1980s, and
the maintenance of higher wages by drivers for UPS might exacerbate the
potential for overstatement of post-deregulation union wage differentials.
14
(1)
LHWAGE
BVUNION
*
B6-SINGLE
+
where:
BO
=
LHWAGE
B2-EDUC
+
B7NE
*
*
B3-EXP
*
B8S0UTH
65NONWHITE
*
B9-WEST
wage
natural log of the hourly
=
*
RA'EXP'^
'
Wages
rate.
less
than $1.00
per hour are assumed to be coding errors and the observations
are deleted.
UNION
=
EDUC
EXP
union member,
a
if
1
number
=
SINGLE
=
=
if
1
if
1
race
1
SOUTH
WEST
=
if
region
=
1
1
if
if
is
non-white,
marital status
present,
=
status
if
is
is
is
is
region.
The
-
EDUC
-
6)
otherwise
other than married with spouse
married,
spouse present.
otherwise
Northeast,
region
region
is
Southern,
Western,
The North Central region dummy variable
relative to this
completed
of years of schooling
experience, defined as (Age
=
NONWHITE
NE
otherwise.
otherwise
otherwise
is
omitted,
so that estimates are
results presented below are robust to variations
in
this specification.
B.
CPS Results
Table
wage
2
presents sample mean union and nonunion wages, estimated union
coefficients from equation
estimates span four
85.
The
full
NMFA
(1),
and unionization rates for each year.
contract periods:
1973-76,
1976-79,
set of estimated coefficients for each equation
is
1979-82,
reported
The
and 1982in
15
TABLE
2
Estimated Wage Premiums and Sample Characteristics:
Annual CPS Data
Year
Mean Wage
Nonunion
Union
1973
$5.65
$3.71
1974
5.75
4.14
1975
6.65
4.21
1976
6.85
4.41
1977
7.54
4.92
1978
8.00
5.74
1979
8.20
6.41
1980
8.51
6.50
1981
9.82
7.67
1983
10.22
7.27
1984
10.94
7.66
Union
16
appendix table lA.
Several aspects of Table
2
deserve mention.
First,
estimated union coefficients during the regulation period cluster around
implying
a
comports
Hayden
t
s
union premium of 50 percent above nonunion wages.
well
with Moore's
(1978) estimate of
(1977) estimated 50 percent
a
premium
1 fi
48 percent premium
in
1973-75.
1
the
.4,
This finding
in
1967 and
However, these
differentials are substantially above the average union differential for cross-
sections of industries estimated on similar data sets.
reports an average union premium for
percent, during the 1973-78 period.
been able
to
captured for
all
Tliis
For example.
Freeman (1986)
blue collar workers of .25, or 36
suggests that the Teamsters may have
capture higher rents for truck drivers than the average union
its
members.
1
8
The second interesting feature
of this table
is
that the union differential
drops sharply between 1977 and 1979.
From 1979 through 1981, the union
coefficient averages about
level
.2]--half
23 percent above nonunion wages.
its
in
1973-1978- -implying premia of only
The estimated union
coefficient increases
The remaining coefficients reported in the appendix table generally are
expected sign, although their effects are often quite small and
This is not particularly surprising, given how narrowly
imprecisely estimated.
One might expect that wages of full-time truck drivers
the sample is defined.
in the for-hire trucking industry would not vary much across workers with
different education or experience levels.
of the
The 1974
coefficient is a notable exception.
The low estimate in this
a sharp decline in the estimated premium for the outgoing
rotation groups in the CPS.
The union coefficient for these groups is .260
(.066 standard error) in 1974, as compared to .451 (.068) in 1973.
year
is
1
the
in
driven by
7
use overlap with Hayden's data, although my specification of
differs slightly from his.
Because of this, the similarity
to be expected for the 1973 through 1975 equations.
The data
wage equation
results
1
is
I
This conclusion holds up against industry-specific union differentials
estimated by Freeman and Medoff (1984) from 1973 CPS data.
Freeman and Medoff
(p. 50) report that half of the 62 industries in their sample had union premia
greater than 15 percent, but only 8 of the 62 had union premia greater than 35
percent.
17
somewhat
1983 and 1984,
in
to an
below the average regulation
average
of
.33,
although
it
remains substantially
The larger standard errors on the post-1979
level.
estimates suggest that the 1979 through 1984 estimates are likely to be
statistically indistinguishable.
Finally,
affiliation
at
there may be
sample or indicative
open question, and
in
evidence
entials,
reported
in
the proportion of drivers with union
of a
will
to a
union.
decline
in
In
1984,
Whether- this
only 34 percent of the
is
the union presence
not be addressed
in
this
is
in
trucking remains an
Although much of the
paper.
required to ascertain whether union representation
a
in
Table
3.
the industry has
union wage differ-
estimate wage equations pooling data across years.
in
in
substantial amount.
test the statistical significance of the decrease
I
an aberration of the 1984
trucking firms has been through entry of nonunion carriers, additional
diminished by such
To
reduction
the end of the sample period.
sample reported belonging
growth
a
These results are
Separate intercepts are estimated for each year, but
other coefficients are constrained to be the same within the pooled sample.
all
The
The higher estimated union premia in 1983 and 1984 could also be real
phenomena, linked to our inability to control for job tenure and firm characteristics.
The average seniority of unionized workers probably rose during the
In addition, the a\erage size
1980s, as union unemployment and layoff rates rose.
of nonunion firms declined during the 1980s in response to substantial entry into
the industry.
Both of these factors could tend to increase estimated union premia
in equations that omit controls for tenure and firm size.
See notes 13 and 14,
supra
The CPS survey design calls for half the respondents in a given year to
This design creates an overlap in
reinterviewed
be
the following year.
years'
surveys.
Because of this, estimates from
respondents for adjacent
therefore have
contiguous years may not be statistically independent.
estimated pooled equations omitting contiguous years (eliminating all even year
The hypotheobservations) to ensure independence of observations across time.
affected
sis tests for homogeneity are not materially
by excluding these years.
The coefficients' standard errors rise somewhat, but this is expected from the
smaller sample size.
I
18
TABLE
3
Pooled Wage Equation s
Variable
UNION
UNION-REG
(1973-78)
UNION-DEREG
(1979-84)
EDUC
EXP
EXP'
SINGLE
NONWHITE
NE
SOUTH
WEST
Mean Intercept
NOB
r2
SSR
1973-1978
.402
(.020)
1979-1984
.254
(.033)
1973-1984
19
first
column pools data over the regulatory period,
pools data over the deregulatory period,
are combined
in
column
3,
1973 through 1978.
1979 through 1984.
which reports results for the
full
Column
2
These two samples
sample,
1973-1984,
allowing the union coefficient to differ across regulatory regimes.
The constrained union
.402
(standard error,
coefficient for the regulatory period
.020).
pooled deregulation sample
in
By contrast, the union wage
column
2
is
.254
the size of the union wage premium measured
reject the hypotheses that
common process.
The
full
wages within each
(.0331,
in
column
is
estimated at
coefficient over the
or roughly 60 percent of
1.
Further, we cannot
of these periods are
generated by
a
21
sample results reported
in
column
3
reject the
restriction of equal
union coefficients across the regulation and deregulation periods at the .001
The
level.
period,
null
hypothesis of homogeneous coefficients across the entire sample
excepting the time intercepts and the union coefficients, cannot be
rejected at conventional levels of significance.
change
in
in
the wage behavior of truck drivers over the period studied
the ability of the union to maintain
O
This suggests that the dominant
its
relative
is
a
decline
wage advantage.
1
The F-statistic to test the restrictions implied by pooling the
regulatory years, 1973-1978, is 1.09, which is distributed as F(45,1506) under
The critical value at a
the null hypothesis (HO) of homogeneous coefficients.
The F-statistic to test the null
10 percent significance level is 1.24.
hypothesis of homogeneous coefficients for the deregulation period, 1979-1984,
This test statistic is distributed as F(36,46B) under HO, with a
is
.75.
critical value of 1.29 at the 10 percent significance level.
The t-statistic to test the hypothesis of equal union coefficients over
regulation and deregulation periods is 4.67.
90
The F-statistic to test this hypothesis is 1.038, which is distributed
The
F(89, 1974) under the null hypothesis of homogeneous coefficients.
critical value at a 10 percent significance level is 1.17.
Note, however, that
the hypothesis that the coefficients in columns 1 and 2 are the same, excepting
the union coefficients, will be rejected at the 5 percent significant level.
The F-statistic for this test is 1.95, which is distributed as F(8,2055).
as
20
A puzzling difference between these results and the contract evidence
the timing of the union relative wage decline.
contracts
the 1982
Section
in
NMFA,
I
CPS wage equations show an
union premium possibly as early as 1978, with
aggregate wage evidence
wages beginning
falls
to decline
a
initial
nonunion wages
relative to the reference
in
made
in
decline
the
in
The
somewhere between the two, with average trucking
concessions, allegedly made by some Teamster locals
in
first
sharp reduction by 1979.
group wages after 1980.
While these are not necessarily contradictory (for example,
increase
in
Analysis of the Teamsters'
suggested that major union concessions were
while the
is
for-
non-contract wage
many smaller
firms,
the late 1970s are consistent with both the
or an
NMFA
and CPS findings), they do warrant further investigation.
Evaluating Wages For
A
first step
differential
I
use as
a
is
a
"Representative" Driver
toward understanding the nature
to look at
wages over time for
"representative" driver
education, 20 years experience,
a
a
of the decline in the union
workei- of given characteristics.
married white male with 12 years of
living
in
the North Central region.
union and nonunion wages for this worker are calculated from
equation pooling data from
all
sample years.
permitted to vary across years;
all
a
Predicted
single
wage
Intercepts and union coefficients are
other coefficients are constrained to be the
same over time.
Table
reports predicted wages for the representative driver
These characteristics are close
to the 1979 sample
The complete set of results for
The constant terms reported
this equation
in
both current
means.
are reported in appendix
the table are estimates of LHWAGE for
nonunion driver with representative characteristics.
table 2A.
a
4
in
21
TABLE
4
Predicted Union and Nonunion Hourly Wages
for a Representative Driver
[Pooled Sample Estimates)
Nominal Dollars
Constant 1984 Dollars
22
dollars
(columns
union differential
of this table are
observed
in
and
1
1984 dollars per hour
in
noteworthy.
Tables
2
and
The
and 1984 constant dollars (columns 3 and 4).
2)
3
First,
presented
is
column
Two aspects
5.
the declining percentage union differential
associated with
is
in
a
decline
the growth of nominal
in
union wages from 1977 to 1979 relative to trend and higher growth rates for
nonunion wages between these years.
This
illustrated
is
which plot predicted union and nonunion wages
constant dollars,
during the 1980s,
real
wages
in
1973-78.
real
In
through 1981 (compared
current dollars and 1984
Predicted union wages aie lower
respectively.
witli
in
figures 2a and 2b
in
wages
in
contrast,
in
real
terms
1983-84 falling 16 percent below the average
real
nonunion wages remain relatively high
to their early 1970s
levels),
and decline only
9
percent
in
1983-84 relative to their average over 1973-78.
Second, the reduction
in
the dollar union wage premium
union wage differential declines
terms the differential
regulation.
falls
Despite an increase
in
The union premium
was $2.85 per hour, or $6400 per year.
in
to its
the real differential
nominal dollars, or about $5700 per year.
$4200 per year
substantial.
nominal dollars between 1977 and 1979;
by almost one-half relative
two-thirds of the 1973-78 level.
in
in
is
In
in
1983,
level
real
under
1983-84,
in
in
The
it
remains only
1975 was $2.53 per hour
the current dollar premium
This represents
a
real
decline of nearly
1984 dollars.
This wage pattern does not appear attributable to the NMFA's failure to
compensate adequately for
in
inflation
during the contract's
life.
The
initial
the union premium comes between 1977 and 1979, despite contract wage
9 fi
The constant
Consumer Price Index
dollar figures were obtained using the average urban
for each year.
decline
23
FIGURE
2
PREDICTED HOURLV WAGES FOR UVIOK AND KOKuMON REPRESEKTATIVE DRIVER
2A:
CURREKT dollars
UNION
NONJNIOK
1673
1S-«
1675
1676
2£;
1977
1660
16?!
i»e;
CONSTA.VT 1964 DOU^^RS
UNION
^—-^
li7J
li74
liTi
167t
1677
NONUNION
24
increases that basically matched CPI increases over this period.
the decline
in
In
addition,
the differential persists through the 1979 contract period and into
the 1982 contract period.
relative union decline than
This suggests
more fundamental cause for the
a
unanticipated inflation
in
the late 1970s.
Comparison of Trucking Wages with Alternative Benchmarks
Disentangling changes
in
union premia
economy-wide movements or idiosyncracies
lematic.
To evaluate these
possiblilities
,
in
the ti-ucking industry from general
of the
I
CPS data
r.el
is
more prob-
compare the CPS results for the
trucking industry to those for four alternative benchmark groups.
coefficients for these
groups are presented
in
Table
For ease of reference,
5.
union coefficients for the trucking industry are reproduced
2
reports Freeman's (1986)
workers.
results for
a
vehicle manufacturing,
and printing industries."
because they employed large numbers
of
in
cross-industry sample
Columns 3-5 report my results for workers
Union
in
column
of
all
1
.
Column
blue collar
the construction, motor
These industries were selected
workers (necessary
to obtain
sufficient
sample sizes from the CPS tapes), were heavily unionized, and were unregulated.
Both the construction and motor vehicle manufacturing industries also underwent
77
Scheduled contract wage increases (including COLAs) between April 1977
and April 1979 amounted to roughly 18%; this compares to a 19.7% increase in
the CPI between May 1977 and May 1979.
op
The union coefficients are estimated from year-by-year equations
similar to (1), incorporating occupational fixed effects within each industry.
Roughly similar results are obtained by looking at particular occupational
categories within each of the three benchmark industries.
25
TABLE
5
Union Coefficients for Benchmark Industry Group s
Average
Year
Truckin g
1973
0.440
0.23
(.050)
(.01)
0.345
0.22
(.052)
1974
1975
1976
1977
1978
1979
1980
Printing
0.289
(.036)
0.391
(.016)
0.122
0.207
(.01)
(.037)
(.037)
0.448
0.22
0.410
(.056)
(.01)
(.016)
0.067
(.036)
0.243
(.039)
0.391
(.050)
0.25
0.416
(.01)
(.017)
0.063
(.043)
0.239
(.037)
0.441
(.040)
0.28
0.438
0.200
(.01)
(.015)
(.037)
0.263
(.038)
0.346
0.27
(.01)
0.417
(.015)
0.201
(.039)
0.288
(.046)
0.212
(.055)
0.22
0.319
0.253
0.156
(.01)
(.023)
(
0.199
0.21
(.01)
0.335
(.026)
0.268
0.280
(.079)
(.095)
0.21
(.01)
0.352
0.292
0.192
(.077)
0.337
(.063)
0.22
0.291
(.041)
0.148
0.258
(.01)
(.085)
(.096)
0.321
(.081)
0.25
0.369
0.204
0.219
(.01)
(.034)
(.099)
(.075)
(.089)
1984
Vehicle
Mfg.
tion
0.124
(.042)
0.208
1983
r
0.420
(.016)
(.089)
1981
Colla
Motor
Construe-
Blue
(.029)
(
.046)
.082)
(.034)
(
.048)
Standard errors in parentheses.
Blue collar estimates
are from Freeman (1986).
Remaining estimates are
from annual CPS wage equations for workers within
each industry, controlling for occupational fixed
effects, sex, and the variables described in equation
(1)
above.
26
on
changes that potentially reduced industry rents.
Use
tend to understate the extent of regulation-induced changes
industry
benchmarks may
of these
in
the trucking
.
Several aspects of the benchmark results
These results are somewhat mixed.
are qualitatively similar to those
I
the union coefficient declines between 1978 and 1979
benchmark groups; the exception
reversed
in
1980
in
For example,
obtain for the trucking industry.
is
in
three of the four
motor vehicle manufacturing.
the printing industry,
This decline
but the average union premia for
is
all
blue collar and construction workers remain near their 1979 levels for several
years, before increasing
however,
Despite these appar-ent similarities,
1984.
in
important distinctions between the benchmark results and those for the trucking
industry suggest that movements
reflective of general trends
Consider
first the
Freeman (1986).
In
in
the
CPS
data.
average blue collar union premium, as estimated by
1979,
in
a
decline
in
contrast, the differential
from 1973-77, then drops
in
whole or
a
This union coefficient rises from .23
over 1973-77.
decline
trucking union wage premia are not merely
the economy as
in
1977, then falls back to .22
level
in
to one-half of
collar differential--a significant
1973 to
10 percent from
in
a
peak
of
it
change from
trucking hovers around
into the
its
.28 in
average
its
1973-77 average level by 1979.
its
the trucking differential brings
in
.4
The
range of the average blue
pre-1979 relative position.
Moreover, Freeman notes that by 1984 the blue collar union differential had
returned
to its
1973-78 average level.
remained 20 percent below
its
For the trucking industry, the differential
average 1973-78
level.
premia for the other benchmark industries are varied.
29
The patterns
The premia
of
in
union
the
For example, the oil price shock and subsequent demand shift to
imported cars adversely affected motor vehicle manufacturers during this
period.
27
construction industry exhibit behavior similar to that of the trucking premia.
The 1973-77 and 1983-84 average premia are
essentially identical for the two
although the average construction premium during 1979-84
industries,
is
substantially higher than the trucking premium during this time period.
may be
similarity
result of the decline
a
in
union influence
industry during the 1970s, as discussed by Allen (1985).
repeated
the other benchmark industries.
in
pattern
in
1983-84,
the union premia
in
in
in
is
sharp contrast
motor vehicle
1970s and early 1980s and
trucking pattern.
to the
No
the printing industry emerges from the data.
it
is
difficult to
The
and the post-1978 average
draw decisive conclusions from these comparisons,
does not appear that the decline
industry
observed
is
in
in
the union wage premium
simply an artifact of the particular data set used.
the trucking industry indicates
a
fail-
premium over the regulatory period, followed by
in
in
not
is
only slightly below the pre-1978 average level.
Although
it
This pattern
late
estimated premia vary considerably from year to year,
level
the construction
The union premium
manufacturing appears to have increased during the
declined somewhat
in
This
the premium
in
1979 and thereafter.
a
amount
that deregulation
earnings indices.
The pattern
of stability
This decline
is
in
in
the union
in
consistent with the
section
I,
may have reduced the union's
advantage before the effects show up
the trucking
dramatic and lasting reduction
contract evidence and aggregate wage data evaluated
CPS data suggest
in
although the
relative
wage
contract negotiations and aggregate
28
Nonunion Rent-Sharing
III.
The
final
possibility
investigate
I
thus far has measured the decline
the trucking industry.
union wages relative to nonunion wages
in
nonunion workers also shared
If
the regulated trucking industry, this comparison
An emerging
union rents and total labor rents.
suggests that nonunion rent-sharing
A number
wage
of
differentials
The analysis
nonunion rent-sharing.
is
the rents available
in
in
tend to understate both
literature
in
labor economics
distinct possibility.
a
is
will
in
recent papers have investigated the existence of inter-industry
and the
role of
Krueger and Summers (1986a,
b)
rent-sharing
explaining their persistence.
in
and Dickens and Katz (1986a, b) provide empirical
evidence on the substantial dispersion
These studies
wages across industries.
in
report high correlations of industry wage differentials across occupations,
countries, and union and nonunion sectors.
possible explanations for their findings,
The authors consider
a
variety of
including efficiency wage models and
possible union and nonunion rent-sharing.
Their findings are generally consistent
with noncompetitive models of wage determination, although they do not provide
clear evidence supporting
a
single theory.
Recent theoretical models also predict nonunion rent-sharing.
provides
to
a
model of union threat effects,
capture higher wages as the firm tries
in
Dickens (1986)
which unorganized workers are able
to deter
workers from organizing
a
Dickens's model, as long as nonunion wages are near union wage levels,
union.
In
workers
will
have no incentive
costs associated with having
a
to
bear the cost of organization.
Firms avoid the
unionized workforce by paying workers enough to
eliminate workers' net benefits from organizing
which does not rely on the presence
of a
a
union
unionized sector
An alternative model,
in
the industry,
is
29
They construct
proposed by Rotemberg and Saloner (1986).
model
is
which incumbent workers are more valuable than new hires, technology
in
characterized by putty-clay features (so that the capital-labor ratio
post),
and workers have some bargaining power vis-a-vis firms.
unorganized workers are able
in
game-theoretic
a
their wages.
to
capture
The model predicts
and the capital-labor
a
share
a
fixed ex
this model,
rents and quasi-rents
of potential
that wages will be
In
is
function of profitability
ratio.
The studies suggest the
the trucking industry.
An
desirability of investigating nonunion
rent-sharing
in
analysis of nonunion wage r-esponses to deregulation
is
important not only for understanding the distribution of rents
in
the trucking
industry, but also for evaluating the nonunion rent-sharing hypotheses proposed
To evaluate the extent
these recent labor studies.
need
a
benchmark against which
to
each year.
all
The equations
?ire
similar to (1),
The
a
I
use an economy-
These are estimated from separate union and
private sector employees reported
digit industry fixed effects.
the wage for
nonunion rent-sharing, we
measure nonunion wages;
wide average wage for this purpose.
nonunion equations for
of
in
in
with occupational,
all-industry average wage
the
May CPS
regional,
is
for
and one-
computed
as
blue collar worker with the characteristics described for the
representative driver
in
table 4,
based on the average of the industry fixed
Estimated union wages are included for comparison.
effects.
These wages are reported
in
table 6,
along with the predicted wages for
n
union and nonunion trucking drivers from table 4.'
1
The results suggest declines
am grateful to Henry Farber for making his moment matrices of these
Because of minor differences in the data construction,
data available to me.
the wage equation for the all-industry regressions differs slightly from (1).
I
The conclusions discussed below are not materially affected if the
wage estimates are replaced by estimates from separate union
This robustness is not
and nonunion trucking wage equations for each year
table 4 trucking
30
TABLE
6
COMPARISON OF TRUCKING WAGES TO AVERAGE ECONOMY WAGES
31
in
both union and nonunion trucking wages relative to the all-industry averages
during the deregulation period.
and 3b, which
plot trucking
workers, respectively.
to
Until
average nonunion wages.
average nonunion wages.
These patterns are clearly evident
1979,
nonunion trucking wages
After 1979, trucking wages
(21
evident
in
rise steadily
relative
increasingly behind
fall
All-industry average nonunion wages increase 35 percent
to only
rises from an
19 percent for the
average
percent of industry average nonunion wages)
1983-84
figures 3a
and all-industry wage? for nonunion and union
between 1979 and 1984, as compared
The nonunion wage gap
in
of
S.63 per hour
to an
average
percent of industry average nonunion wages)
trucking industry.
in
1978-79 (8
of S2.21
per hour
in
Similar patterns are
"•
'
no
the union wage comparisons.
These results should be interpreted with some caution
The sample
nonunion trucking drivers are quite small, averaging only 35
1980s.
to 45
sizes of
workers
in
the
These suggest quite substantial standard errors on the wage estimates.
addition, the magnitude of the trucking
wage decline depends
period over which changes are measured.
critically
upon the
Because trucking wages gain relative
average wages during the 1970s, using 1978 or 1979
and comparing changes through 1983 or 1984
will
as the
In
to
regulation base year
lead to larger estimates of
nonunion rents than would be predicted using earlier years as the regulation base.
surprising, given the pattern of sample mean wages reported
in
table 2.
Nonunion trucking wages are roughly the same percentage of all-industry
average nonunion wages in 1983-84 that they are in 1973-74.
This may somewhat
complicate the interpretation of the post-1979 increase.
TO
The
union trucking wages is dramatically lower than
that for all-industry average union wages after 1979.
There is a 67 percent
increase in all-industry average union wages between 1979 and 1984, compared to
This disparity
a 33 percent increase in trucking wages over the same period.
is sufficient to reverse the historic superiority of trucking wages;
by 1983,
union trucking wages have for the first time in the sample fallen below allindustry average union wages.
rate of increase
in
FIGURE
3
COMF/yv:SOS CF TRIXKING WAGES WITH AL'^- ISDl'STRV AVERAGE WAGES
3A;
NOKUNION WORKERS
ALL-INDUSTRY
TRUCKING
1
673
1S7<
D
1676
1»7e
1
fr7
1676
19eC
1676.
1961
1
&53
1&64
AU. INPU5TFY AVE
TRUCKING
3B:
UNION WOR};ERS
ALL-IN2L'STRY
TRUCKING
INli'J'I-'^T
Av^
33
Witti
thesp caveats
in
mind,
the hypothesis that nonunion,
however, the findings nevertheless appear
as well as
union,
rents available under motor carrier regulation.
trucking drivers shared
to
in
support
the
34
Aggregate Union Losses
IV.
The magnitude
rents implied by these results
of the
the findings into context,
from deregulation.
I
calculate
I
a
rough measure
is
of the total
in
table
A number
7.
aggregate union rents.
First,
I
The
assumptions are required
of
losses
resulting
by the Teamsters
restrict this calculation to rents captured
Union, because of the difficulty quantifying nonunion rents.
summarized
To put
substantial.
calculation
to
compute
assume that deregulation reduced the 1973-78
The
union premium of 50 percent to the 1983-84 average premium of 39 percent.
sensitivity of the estimate to this assumption
assuming
a
is
is
checked by recalculating losses
decline to the 1979-84 average premium of 30 percent.
assume that nonunion wages are unaffected by deregulation.
Second,
This
will
I
understate
both union and nonunion rents to the extent that nonunion wages were bid up
under regulation.
premium
to a
reduction
overall trucking
in
My
wage
union employment.
unemployment rates
in
calculation attributes the entire
in
rents,
but omits any change due to
Finally,
level.
There
is
change
I
in
a
the union
decline
exclude potential losses from
a
in
the
reduction
substantial anecdotal evidence that Teamster
the trucking industry have increased substantially since
deregulation, and that nonunion carriers have captured an increasing share of the
market.
My computation
of
rent reductions excludes the union's loss from jobs
that are no longer held by union employees.
^"^
The Wall Street Journal (October 9, 1984, p.1) reports that the
Teamsters Union estimates 100,000 jobs have been lost since 1980.
Lieb (1984)
and Hendricks (forthcoming) discuss the effects of increased nonunion competition on union employment.
Although it is difficult to disentangle the role of
regulatory reforms from that of the 1981-82 recession, the persistence of such
high union unemployment rates appears to be considered abnormal by industry
observers.
35
TABLE
7
Aggregate Losses and Division
1.
of
Rents
Aggregate losses for union
A.
Assumptions;
union premia declines from 50% to 39%
union premium dpclines from 50% to 30%
sensitivity check;
nonunion wages are unaffected by deregulation
unionization rate
B.
is
constant
at
60%
Result for Class I intercity motor freight carriers
886 firms (revenues greater than $5 million)
Aggregate employee compensation;
1983;
$12.24 biUion
8.27 billion
657 million
1.24 biUion
Implied union compensation;
Implied union loss;
Implied \inion loss at 30%;
Division of rents between firms and union;
A.
in
general freight carriers
Assumptions:
above assumptions l.A. for union rent share
present discounted value (pdv) of firm rents equal to 8.8% of
1978 aggregate revenue for general freight carriers
(from Rose, 1985a)
10 percent discount rate, 50 percent corporate income tax
rate
rents are perpetuity
B.
Result for Class I intercity general freight common carriers
345 firms (revenues greater than $3 million)
in
1978,
Aggregate revenues:
$17.50 billion
Implied pdv of firms' rents:
Implied annual pre-tax firm rents:
1.54 biUion
308 million
Aggregate employee compensation;
8.82 biUion
6.11 bUlion
448 mlUion
814 mlUion
Implied union compensation;
Implied annual union rents at 39%;
Implied annual union rents at 30%;
C.
Comparison
of rent
shares,
Annual pre-tax firm rents;
Annual pre-tax union rents:
Union share:
Total rents/Total revenues:
1984 dollars
$490 miUion
$713 miUion - $1.3 bUlion
59
4.3
-
-
73
percent
6.4 percent
36
The
loss to an
individual union driver
estimated
which
to 15 percent of his current compensation,
his
is
the results above at 8
in
the decline relative to what
is
compensation would have been had the 50 percent union differential been
The
maintained.
union loss
total
is
estimated by aggregating over
motor carriers, which are regulated firms with more than $5 million
Although
gross revenues.
(which are quite small),
this
of total
total
revenues.
deregulation union premium of 30 percent
annual
in
the industry,
in
Applying the assumptions
I
motor carriers
and an estimated annual reduction
rents for unionized employees of these firms.
in
is
I
high proportion of trucking firms
employee compensation for Class
implies union compensation of $8.27 billion,
$657 million
a
comprises the very largest companies
it
accounting for half or mote
described above to 1983
group excludes
Class
all
used
in
of
the average
If
the calculations, the
estimated union loss rises to $1.24 billion.
Finally,
by owners
of
the reduction
in
trucking firms, to estimate the relative shares of rents for
unionized labor and capital.
in
market value for
1S78 revenues.
freight
a
Applying
The
1978,
loss.
this estimate to
A,
in
1984 dollars.
8.8 percent of
1978 Class
all
loss of $1.54
general
1
billion
in
in
annual pre-
Applying the calculation
a 39% premium is given by:
nonunion wage.
The percent
for
at
This corresponds to roughly $308 million
or $490 million
nonunion wage - -.11
-.11/1.39 = -.08.
revenues for
yields an estimated after-tax
present discounted value.
in
Rose (1985a) estimates the deregulation- related loss
sample of general freight trucking firms
common carriers
tax rents
union rents can be compared to the losses incurred
A
loss
is
(1.39
-
1.50)
A/union earnings
=
Total employee compensation of $12.24 billion for the 886 Class
motor
carriers reporting to the ICC is taken from the U.S. Interstate Commerce Commission Bureau of Accounts, Transport Statistics in the United States.
Motor
Carriers.
1983.
Part 2
1
,
37
described above to employee compensation for these firms yields an estimate of
$448 to $814 million
in
1984 dollars.
in
pre-tax union rents
in
1978,
or $713 million to $1.3 billion
These calculations, while crude, suggest that the Teamsters
Union may have been the dominant beneficiar-y trucking regulation capturing G0%
or more of the total rents
in
the industry. 37
Total rents are measured as union rents plus firm rents.
This excludes
rents captured by nonunion labor and other factors of production.
This finding
is consistent with the estimated union share obtained in a Tobin's q type of
model of trucking firms; see Rose (1985b).
The union share is strikingly
similar to Salinger's (1984) estimate of a 77 percent average union rent share
in
his
cross-industry studying employing Tobin
s
q.
38
Conclusion
This study examines industry wage responses to motor carrier deregulation.
Union contract evidence and aggregate data on industry average earnings suggest
substantial changes
deregulation.
wage determination patterns after motor carrier
historical
in
Microdata estimates of union premia over nonunion wages
in
the
trucking industry indicate declines of 30 to 40 percent
in
differential beginning
"representative" union
driver
in
in
1983-1984 were
Annual earnings for
1979.
at
least $2200,
a
or 8 percent,
the size of the union
less
than they would have
been had the regulatory union wage differential been maintained.
The annual
suggest considerable rent-sharing by union workers.
rents
is
estimated at $657 million to $1.24 billion
regulated trucking firms
in
1983.
The
nonunion rent-sharing.
Comparison
results also indicate
owners
of capital
in
to 70
percent of
this
in
this area
total
rents.
in
decline
in
nonunion
seems desirable.
competitive factor prices can be quite misleading,
of
rents accruing to
may have been the primary
the trucking industry,
The findings suggest
labor rent-sharing hypotheses.
a
Although the paper does
paper with estimates
indicate that the Teamsters Union
beneficiary of regulatory rents
union
in
the result provides some support for models of
Further research
of the results
loss
employees of the 886 largest
for-
trucking wages relative to economy-wide wage levels.
not precisely quantify this effect,
These results
capturing as much as 60
that the assumption of
and provide strong support for
39
to a>
fSl fM
in
m
M o
40
TABLE 2A
Results for Pooled Sample Wage Equatio n
Year
1973
1974
1975
1976
1977
1978
1979
1980
1981
1983
1984
41
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