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Deregulation and Labor Earnings in the Airline Industry

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  • David Card

    (Princeton University)

Abstract

This paper uses a variety of data sources to track the earnings of airline industry employees over the past two decades and assess the changes that have occurred since deregulation in 1978. Individual microdata from Census files as well as collective bargaining contract information are used to follow wages for pilots, flight attendants, mechanics, and workers as a whole. Perhaps surprisingly, I find that the real earnings of airline workers have declined only modestly in the past 10 years. Comparisons with other groups of workers suggest that these declines have been about the same or only slightly larger than those observed for most other workers in the economy. Furthermore, within the airline industry, the declines in earnings have been similar for all three groups of skilled workers. If the deregulated industry can be taken as a competitive benchmark, these findings suggest that the regulatory rents earned by airline workers prior to deregulation were relatively small. This view fails to explain the wide inter-firm variation in earnings that has emerged in the post-deregulation period, however. An alternative interpretation is that rents continue to exist at many airline firms, and that these rents continue to be shared by employees at the successful airlines.

Suggested Citation

  • David Card, 1989. "Deregulation and Labor Earnings in the Airline Industry," Working Papers 627, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:247
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    References listed on IDEAS

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    Cited by:

    1. Dag Morten Dalen & Nils-Henrik M von der Fehr & Espen R Moen, 2003. "Regulation with wage bargaining," Economic Journal, Royal Economic Society, vol. 113(487), pages 525-538, April.
    2. Maria Guadalupe, 2007. "Product Market Competition, Returns to Skill, and Wage Inequality," Journal of Labor Economics, University of Chicago Press, vol. 25(3), pages 439-474.
    3. Dhillon, Amrita & Petrakis, Emmanuel, 1995. "On Centralized Bargaining in a Symmetric Oligopolistic Industry," The Warwick Economics Research Paper Series (TWERPS) 444, University of Warwick, Department of Economics.
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    5. Doan, Tinh & Tran, Tuyen Quang & Nguyen, Hien, 2018. "Provincial Competitiveness And Labour Market Returns In Vietnam," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 59(2), pages 95-112, December.
    6. Hirsch, Barry, 2006. "Wage Determination in the U.S. Airline Industry: Union Power under Product Market Constraints," IZA Discussion Papers 2384, Institute of Labor Economics (IZA).
    7. Erica L. Groshen & David K. Levine, 1998. "The rise and decline(?) of U.S. internal labor markets," Research Paper 9819, Federal Reserve Bank of New York.
    8. Janice Bellace, 2014. "American Unions And The Economy — The Unheard Voice Of A Shrinking Sector," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 59(04), pages 1-20.
    9. Abigail K. Wozniak, 2007. "Product Markets and Paychecks: Deregulation's Effect on the Compensation Structure in Banking," ILR Review, Cornell University, ILR School, vol. 60(2), pages 246-267, January.
    10. Sonja Jovicic & Ronald Schettkat, 2013. "Does Inequality Promote Employment? An International Comparison," Schumpeter Discussion Papers SDP13009, Universitätsbibliothek Wuppertal, University Library.
    11. Fernandes, Ana P. & Ferreira, Priscila & Alan Winters, L., 2014. "Firm entry deregulation, competition and returns to education and skill," European Economic Review, Elsevier, vol. 70(C), pages 210-230.
    12. Bouis, Romain & Duval, Romain & Eugster, Johannes, 2020. "How fast does product market reform pay off? New evidence from non-manufacturing industry deregulation in advanced economies," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 198-217.
    13. Dalen, D.M. & von der Fehr, N.-H.M. & Moen, E.R., 1998. "Regulation and Wage Bargaining," Memorandum 13/1998, Oslo University, Department of Economics.
    14. Hübler, Olaf & Meyer, Wolfgang, 2000. "Industrial Relations and the Wage Differentials between Skilled and Unskilled Blue-Collar Workers within Establishments: An Empirical Analysis with Data of Manufacturing Firms," IZA Discussion Papers 176, Institute of Labor Economics (IZA).
    15. Dube Arindrajit & Reddy Sanjay G., 2014. "Threat Effects and Trade: Wage Discipline through Product Market Competition," Journal of Globalization and Development, De Gruyter, vol. 4(2), pages 213-252, March.
    16. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(2), pages 217-272.
    17. Pierre-Yves Crémieux, 1996. "Le marché du travail et l'évolution des salaires dans le transport aérien aux États-Unis : l'effet de la déréglementation de 1978," Économie et Prévision, Programme National Persée, vol. 126(5), pages 45-61.
    18. Camille Logeay & Sabine Stephan & Rudolf Zwiener, 2011. "Driving forces behind the sectoral wage costs differentials in Europe," IMK Working Paper 10-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    19. Alexey Levkov, 2010. "Branching of banks and union decline," Supervisory Research and Analysis Working Papers QAU10-7, Federal Reserve Bank of Boston.
    20. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
    21. Jennifer K. Shanefelter, 2008. "Restructuring, Ownership and Efficiency: The Case of Labor in Electricity Generation," EAG Discussions Papers 200812, Department of Justice, Antitrust Division.
    22. Tinh Doan & Tran Quang Tuyen & Hien Nguyen, 2018. "Local Competitiveness and Labour Market Returns in a Transition Economy: Evidence from Vietnam," Working Papers in Economics 18/06, University of Waikato.
    23. Disney, Richard F & Gosling, Amanda, 2003. "A New Method for Estimating Public Sector Pay Premia: Evidence from Britain in the 1990's," CEPR Discussion Papers 3787, C.E.P.R. Discussion Papers.
    24. Schettkat, Ronald, 2003. "Koordination von Lohnverhandlungen (Coordination of wage bargaining)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 634-648.
    25. Schettkat, Ronald, 2003. "Koordination von Lohnverhandlungen (Coordination of wage bargaining)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 634-648.

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    More about this item

    Keywords

    deregulation; wages; airline industry;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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