Revenue per truckloadton fell 22 percent from to A survey of shippers indicates that they believe service quality improved as well. Some 77 percent of surveyed shippers favored deregulation of trucking. Shippers reported that carriers were much more willing to negotiate rates and services than prior to deregulation. Truckers have experimented with new price and service options. They have restructured routes, reduced empty return hauls, and provided simplified rate structures.
In arguing against deregulation, the American Trucking Associations predicted that service would decline and that small communities would find it harder to get any service at all under the new regime. In fact, service to small communities has improved and complaints by shippers have declined.
The ICC has reported that in and it handled and complaints, respectively, against truckers; in it had to deal with only 23 cases, and just 40 in A ICC study of the effect of partial decontrol on small cities and remote parts of the country found that service quality had either been improved or remained unaffected by deregulation.
Increased competition has bolstered the willingness of trucking firms to go off-route to pick up or deliver freight. Deregulation has also made it easier for nonunion workers to get jobs in the trucking industry. This new competition has sharply eroded the strength of the drivers' union, the International Brotherhood of Teamsters. Before deregulation ICC-regulated truckers paid unionized workers about 50 percent more than comparable workers in other industries. Although unionized drivers still are paid a premium, by unionized workers were only 28 percent of the trucking work force, down from around 60 percent in the late seventies.
The number of new firms has increased dramatically. By the total number of licensed carriers exceeded forty thousand, considerably more than double the number authorized in The ICC had also awarded nationwide authority to about five thousand freight carriers.
The value of operating rights granted by the ICC, once worth hundreds of thousands of dollars when such authority was almost impossible to secure from the commission, has plummeted to close to zero now that operating rights are easy to obtain. Intermodal carriage has surged sharply since from to , it grew 70 percent. The ability of railroads and truckers to develop an extensive trailer-on-flatcar network is a direct result of the MCA and the Staggers Act , which partially freed the railroads.
The motor carrier industry has made little use of the rate zone provision and instead has opted for independent filings, which have increased sharply. These independent filings have increased price competition. Such filings by definition are not agreed on through rate bureaus. Truckers have been able to slash rates mainly by improving efficiency—reducing empty backhauls, eliminating circuities, pricing flexibly, and reducing by about 10 percent the proportion of employees who are drivers and helpers.
At the same time, it has cut the pay of such employees by over 10 percent relative to wages of workers in the economy generally. In other words, although wages of drivers and helpers are still considerably higher than wages of comparable workers in other industries, the differential has shrunk. Savings One of the economy's major gains from trucking deregulation has been the substantial drop in the cost of holding and maintaining inventories.
Because truckers are better able to offer on-time delivery service and more flexible service, manufacturers can order components just in time to be used and retailers can have them just in time to be sold. As a result inventories are leaner. Without the partial deregulation that resulted from the act, these changes would not have been possible. In , inventories amounted to 14 percent of GNP; one study found that because of improved transportation services traceable to the Motor Carrier Act of and the Staggers Act, the total fell to A more conservative estimate by the Department of Transportation is that the gain to U.
Current Issues Federal law still requires new carriers to apply for certificates of public convenience and necessity. All tariffs must be filed with the commission. Most states continue to enforce strict entry and price controls on intrastate carriers. These controls cause inefficiency. One result is that in some cases, shipping products from overseas is cheaper than shipping the same goods within the United States.
Shipping blue jeans from El Paso, Texas, to Dallas, for example, costs about 40 percent more than shipping the identical jeans from Taiwan to Dallas.
The continuing obligation to file tariffs results in higher costs. To today's drivers, his was a good life in a golden age — an age that many say ended on July 1, , when President Jimmy Carter put his name to the Motor Carrier Act of , the law that deregulated the trucking industry.
Starting in , the federal government set the price to move a good from one city to another. Trucking companies had to apply for the right to carry a certain good, which made it challenging for folks like Heine to even become a truck driver. The MCA broke up that system, allowing anyone to haul any good, to any place, for any price they liked. In signing the bill, Carter said he hoped it would stymie "excessive and inflationary Government restrictions and redtape.
And he was right. But another of his claims — "All the citizens of our Nation will benefit from this legislation" — lies on shakier ground. The biggest winners of the MCA, though, didn't earn a mention in Carter's signing statement, perhaps because neither the president nor anyone else saw them coming.
They were the national and international retail chains that have surged to market dominance in recent decades. Experts say that today's big-box and online retailers wouldn't exist if the government had not given up its ability to control freight prices. No Walmart. No Home Depot. No Amazon. And certainly no Amazon Prime. Deregulating trucking created significant cost savings for America's emerging class of retail mega-chains.
Today, America's most successful retailers wield transportation as a weapon. It's why Jeff Bezos opened Amazon's first fulfillment center five years after he founded the website and why Sam Walton used to drop by his Walmart drivers' break rooms bearing boxes of donuts to hear their thoughts about the business. If deregulation hadn't enabled these retailers to so ruthlessly rationalize their supply chains, Americans would certainly have access to fewer goods — and those goods would be more expensive.
That's the sound a semi made in the s when it shifted gears, before mufflers and automatic transmissions were common features. At 6 years old, Heine heard it from the back seat of the family car on a road trip. They had stopped at a truck depot in Bakersfield, California, on their way to San Diego.
The sound set Heine on his career path. Where are they going? After graduating from high school, Heine started to work his way up in the trucking industry, going from school-bus driver to cement hauler to local truck driver for Consolidated Freightways, then the titan of the trucking world. In , a year after Heine retired, Consolidated Freightways went bankrupt, as did every trucking giant of the 20th century that couldn't compete in a deregulated industry.
Most failed to last anywhere near that long. In the three years following deregulation, 72 freight haulers shut down. By , some 4, trucking companies had shuttered. That slammed drivers' wages, as trucking companies were forced to begin slashing payrolls to keep up with new industry entrants. In some urban areas, they've declined by as much as half. The trucking cartel shared its rents with unionized labor. During the s, employees of regulated intercity trucking firms received compensation between about 40 percent to 55 percent greater than employees or owner-operators at comparable unregulated trucking firms.
Between and , real rail revenue per ton-mile fell by nearly 50 percent. At least one-third of this rate reduction can be attributed to the Staggers Act. Rates dropped because the Staggers Act gave railroads greater flexibility to cut costs and improve productivity. Between and , total operating expenses of the largest, class I railroads fell by half. By the late s, miles of class I trackage fell by almost 30 percent, and class I railroad employment fell by about 60 percent.
New short line railroads formed to operate some of the trackage shed by the largest railroads. Labor cost savings came largely from reducing the number of employees. The quality and safety of rail service improved noticeably, as the Staggers Act allowed railroads to negotiate service reliability guarantees. By the mids, railroad delivery time fell approximately 30 percent along with the variance of delivery time. Patrick McLaughlin and I estimated that the Staggers Act was responsible for nearly 90 percent of the reduction in the rail accident rate between and For railroads, the primary remaining policy challenge involves rate complaint procedures for shippers who lack good transportation alternatives to a single railroad.
This residual regulatory responsibility of the ICC and its successor, the Surface Transportation Board STB , has been contentious, particularly for cases involving smaller shippers. The committee also suggested that the STB submit the rate to arbitration if it exceeds a designated percentile in the distribution of competitive rates. This change would require legislation. In , the STB proposed to employ final-offer arbitration to set rates when it determines that the shipper has no good transportation alternatives and the rate is unreasonable.
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