Railroad Deregulation: Pricing Reforms, Shipper Responses, and the Effects on Labor

Abstract

The Staggers Rail Act of 1980 relaxed restrictions on pricing and eased abandonment procedures in the railroad industry. Although the Act made virtually no reference to labor, its impact on labor has been dramatic. The long-term contraction of industry employment accelerated quite sharply after 1980. Wages increased until 1985, then declined substantially. The authors, whose empirical analysis uses data on aggregate rail employment for the years 1963–90, Current Population Survey data for 1973–88, and evidence from collective bargaining agreements for 1971–90, argue that pricing adjustments under the Staggers Act led to changes in shipper behavior, which in turn allowed for large declines in the derived demand for rail labor despite increasing output; and the observed pattern of wage change followed from the realization of the Act's eventual effects on employment.