RAILROAD DEREGULATION - PRICING REFORMS, SHIPPER RESPONSES, AND THE EFFECTS ON LABOR

The Staggers Rail Act of 1980 relaxed restrictions on pricing and ease d abandonment procedures in the railroad industry. Although the Act ma de virtually no reference to labor, its impact on labor has been drama tic. The long-term contraction of industry employment accelerated quit e sharply after 1980. Wages increased until 1985, then declined substa ntially. 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 19 71-90, argue that pricing adjustments under the Staggers Act led to ch anges 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 A ct's eventual effects on employment.