Abstract
Theory suggests that the divesture of a corporate monopoly such as AT&T could lead to greater earnings variations developing across the now autonomous regional companies. Individual worker information drawn from Current Population Survey files is used to investigate divesture’s influence on regional earnings in this industry. This study presents evidence suggesting larger erosion of the union telecommunications earnings advantage in regions where state utility commissions encourage competition. A broader regional earnings effect is found for nonunion telecommunications employees. For instance, the earnings advantage of nonunion workers and managers in this industry declined appreciably across all regions. These findings indicate the differing regional earnings effect of divestiture and competition on the three major groups of telecommunications employees.
Highlights
Corporate divestiture is a common approach used to address diseconomies that can arise from operating large-scale organizations
Divestiture might lead to wage levels differing across companies because unions representing workers of divested companies face the possibility of negotiating with more firms
This study examines regional labor earnings in telecommunications following the divestiture of American Telephone and Telegraph (AT&T), the industry's dominant firm
Summary
Research examining divestiture's influence on regional earnings patterns of union workers, does not find strong evidence suggesting that telecommunications wages are lower in regions where carriers face price-cap regulation and stepped-up competition (Cappelli and Perry 1986; Keefe and Boroff 1994). These studies find relative uniformity of regional telecommunications wages for union workers following divestiture. Telecommunications earnings differentials of managers are estimated by region Making this additional observation is warranted since these employees face a highly competitive labor market and present regional telecommunications carriers with possibly the greatest opportunity to pay earnings that more closely resemble area rates
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