Labor in a subsidized environment : mass transit as a case study

This study addressed the question of whether labor in a subsidized organization, without realizing productivity increases, is able to achieve larger wage settlements and better fringe benefits as compared with what labor could achieve under non-subsidized or marketplace conditions. The mass transit industry, which is heavily subsidized, was used as a case study to determine what transit labor through collective bargaining was able to achieve during three periods: pre-subsidy (1960-64); federal capital subsidy (1965-74); and federal capital and operating subsidy (1975-77). The study included a historical overview of the transit industry since World War II and the development of federal assistance legislation. The literature review focused on labor in the regulatory environment, the public sector, the transit industry, and in organizations receiving government assistance.

A bi-level approach for analysis was used as the basis for hypothesis testing. The first examined the transit industry, the second examined transit properties in six cities: Baltimore, Boston, Chicago, New Orleans, Omaha, and Columbus, Ohio. The wage trends, fringe benefits, and productivity of transit operating employees were compared with those of groups in the private and/or public sectors within the economy.

Findings in those three categories illustrated that transit labor in a subsidized environment achieved the following: 1) wage increases similar to those of local truck drivers, employed in a growth sector; 2) wage increases larger than those of the other comparison groups; 3) a larger percentage of collective bargaining agreements having cost of living adjustment clauses than the agreements in the private sector; 4) fringe benefits in high wage gain cities were better than those for labor in other industries while fringe benefits in low wage gain cities were at least similar to those of labor in other industries; and 5) a limitation on work rules and scheduling. Transit employment increased during the subsidized periods, while productivity declined.

Recommendations are presented for policy makers and for additional research in the following areas: restrictive work rules; use of part time labor; productivity; cost of living adjustment clauses; and financial implications of fringe benefits.