Wages in Rail Markets: Deregulation, Mergers, and Changing Networks Characteristics

The Staggers Act of 1980 largely deregulated the Class I Railroad industry and has had profound effects on labor. Between 1978 and 1994, employment in the industry decreased by about 60%, while real wages (average compensation) increased by over 40%. Earlier research examined employment effects; in this article, we develop and estimate compensation effects using firm-level data. By using firm-level data, we are able to identify the effects of partial deregulation, an accompanying and massive consolidation movement, as well as changes in firm operating and network characteristics. Our estimates suggest that mergers contributed 5–15%, partial deregulation contributed about 20%, and changes in firm operating and network characteristics contributed 4–5% to the overall increase in wages.