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WORKING PAPER
ALFRED P. 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


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8
protecting union jobs from being transferred to nonunion workers, and Teamsters

Q

agreed to relaxation of some worl< rules.

The 1985 contract introduced a number of additional concessions. Although
it provided for contract wage increases for current full-time employees
($1.50/hour over the life of the contract, of which 93 cents was considered to be
a cost-of-living adjustment), the agreement sharply reduced wages for part-time
employees and new hires. The base rate for casual and part-time employees was
cut 17 percent, to $11.00 per hour. The wage structure for new hires provided
for lower wages during the first three years of employment (at 70%, 80%, and 90%
of the full-time rate during the first, second, and third years, respectively).
Finally, the NMFA contract terms overstate the union's compensation package in
the industry. National bargaining was substantially weakened in the 1980s, as
Increasing numbers of employers sought - and obtained - individual concessions from
their local or regional union. A substantial number of these smaller companies
refused to sign the 1982 or 1985 NMFA.^

Negotiators for both sides attributed these radical departures from historical
contract terms to the effects of deregulation on the industry. Deregulation
brought with it increased entry and price competition. This led to a surge in the
number of nonunion companies, and coupled with the 1981 recession, resulted 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.



members. These conditions induced the union and trucking firms to agree in

November 1981 to reopen the 1979 contract, even though it had five months left
to run. The resulting contract was approved and in place by March 1982.
Continued deterioration of industry conditions led trucking management and union
leadership to agree on further concessions in the summer of 1983. This
agreement would liave reduced wages for part-time employees and laid-off
employees recalled to work. Although the union membership rejected the proposal
in fall 1983, quite similar provisions eventually were embodied in the 1985
contract.

The 1982 and 1985 National Master Freight Agreements suggest that deregu-
lation disrupted the historical pattern of union wage-setting in the trucking
industry, and led to substantial concessions in union wage levels. Unfortunately,
this evidence is not decisive. Although recent union contracts appear to have
been strongly concessionary, this conclusion depends on what settlements in the
counterfactual state would have been. Some sort of benchmark against which to
measure NMFA wages is necessary. For example, if economy-wide wages exhibited
the same pattern as NMFA wages, one would not wish to conclude that
deregulation accounted for the wage reductions in trucking.

One possible benchmark would be to measure wage movements in the
trucking industry relative to wage movements in comparable, but non - regulated
industries. 1 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
union contract terms. Figure 1 plots the movement of average hourly earnings
for the four groups from 1971 through 1984. Wages in the trucking industry move
roughly together with mining and construction earnings until 1980. After 1980,
trucking wages decline, both relative to mining and construction wages, and
absolutely in 1983. Of course, these findings do not necessarily imply that wages
in the trucking industry have declined. If union workers earn more than
nonunion workers, a decline in the proportion of unionized workers could reduce
average earnings even if union wage levels were unaffected.

An alternative approach is to measure union wages against nonunion wages
in the trucking industry. This comparison is the focus of the next section. It
has two main advantages. First, this reference group is quite similar to the union
truck drivers I am most interested in analyzing. Second, looking at union wage
behavior relative to nonunion wages in the industry proves a straightforward way
to quantify the effects of deregulation. One caution is urged, however. If
deregulation reduced nonunion wages, then this reference point may understate
the ability of the Teamsters Union to capture regulatory rents, and consequently
understate the effect of deregulation on union wages.



;:^



11



FIGURE 1



COMPARISON OF AVERGE HOURLY EARNINGS




71 72 73 7Z 75 76 77 78 79 80 B 1 82 83 8^ 85



TRUCKING + MANUFACTURING



MINING



A CONSTRUCTION



Source: U. S. Department of Labor, Bureau of Labor Statistics.
Earnings . Annual average hourly earnings reported for 1971-83.



En^rloNinent and



u earnings



TCP



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
II. Union Rent-sharing: CPS Evidence

This section uses microdata from the Current Population Survey (CPS) to
quantify changes in union wage behavior over time. The CPS provides infor-
mation on large samples of workers (necessary to obtain adequate subsamples of
truck drivers) and is available over a sufficiently long period of time to permit
analysis of union premia before and after trucking deregulation. Wage and union
status information are available on the May CPS for each year from 1973 through
1984, with the exception of the 1982 survey, for which union status information
was not collected. Although the data set has numerous shortcomings (see
Freeman (1986) for a discussion), these features make it attractive for the present
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 levels. The May CPS provides information on most
of these. Available data on worker qualities include union status, education, age,
sex, race, and marital status. Because women comprise a very small fraction of
truck drivers (frequently in the CPS samples, and never more than 2 percent),


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Online LibraryNancy L RoseLabor rent-sharing and regulation : evidence from the trucking industry → online text (page 1 of 4)