10 Unforeseen Effects of Deregulation


Bye, Bye Jobs

The Interstate Commerce Commission (ICC) was created in 1887 to regulate railroads. It controlled rates, ruled on proposed mergers and made sure the railroads served most areas.

By the 1960s, times had changed. Railroads had new competition from cars, trucks and airplanes. Rate regulations made it hard for them to compete, especially against trucks. A third or more of the industry was bankrupt, or about to be.

Deregulation started with the Railroad Revitalization and Regulatory Reform Act of 1976. That made it easier for the railroads to change rates, merge and stop running unprofitable routes. Four years later, Congress passed the Staggers Rail Act of 1980, which further eased regulations.

There were good results. Railroads made rates more flexible. They dropped the businesses that were losing money and increased the profitable ones. They abandoned miles of tracks. When the interstate highways got crowded and gas prices rose, railroads started hauling truck trailers.

But the passenger service and short routes the railroad companies abandoned were the ones that needed more workers. It didn't take many workers to serve a train loaded with nothing but coal or grain. Unions lost power and had to agree to drop the job of brakemen -- about a third of workers on trains [source: Slack].

Similarly, after Congress passed the Airline Deregulation Act of 1978, airlines started new routes, dropped unprofitable ones and slashed fares. Within a few years, fuel prices rose and many airlines began to lose money. Mergers and bankruptcies hurt the power of labor unions, and they had to give concessions on jobs and wages. Many jobs were lost.