Earnings and Employment in Trucking: Deregulating a Naturally Competitive Industry

The effect of motor carrier deregulation on the employment and earnings of truck drivers is examined, using data for the period 1973-95. The use of a quasi-experimental design is made possible through the comparison of wages before and after deregulation among drivers in the previously regulated for-hire sector, drivers in unregulated private carriage, and an economy-wide group of male non-driver nonprofessionals. Deregulation is associated with approximately a 15 percent relative wage decline among drivers employed in the for-hire sector, resulting primarily from decreases in union wages and a shift from high-wage union to low-wage nonunion employment. In contrast to wage losses among for-hire union drivers, losses among nonunion drivers relative to workers economy-wide are small. The decline in wages among both union and nonunion drivers in the unregulated private carriage sector largely mirrors wage changes among the male non-driver control group. Our results indicate that there was little rent sharing during the regulatory period among drivers in unregulated private carriage or among nonunion drivers in the regulated sector. Sizable wage advantages among for-hire drivers and among union drivers in both the forhire and private sectors have been maintained throughout the deregulation period. Panel analysis and use of supplemental data on skills and working conditions indicate that unmeasured worker skills and work shift can account for all of the wage advantage among drivers in the forhire sector, while worker skills (associated in part with occupational tenure) may account for about twothirds of the union wage advantage. Deregulation has also affected employment, as evinced by a sharp decline in union density, slow employment growth in private carriage as compared to growth in the for-hire sector and among owner-operators, and through an increase in minority employment in the previously regulated for-hire sector. 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.