The Effect of Deregulation on Employee Earnings: Pilots, Flight Attendants, and Mechanics, 1959-1992

Abstract

Prior studies of the effect of the 1978 Airline Deregulation Act on employee earnings have reported mixed results: some have found no negative long-run effect of deregulation and others have found a negative effect of up to 10%. Most of these studies relied on cross-sectional analysis of a few years' data. This paper, in contrast, examines the long-term trends in airline earnings, based upon 34 years of newly collected firm-level data from the U.S. Department of Transportation's Form 41 and airline workers' unions. It was found that although deregulation had no statistically significant effect on the earnings of mechanics, it strongly affected the earnings of flight attendants and pilots. Flight attendants' earnings were at least 12% lower by 1985 and 39% lower by 1992 than they would have been if deregulation had not occurred, and the corresponding shortfalls for pilots were 12% and 22%, respectively, for the same years.