U.S. public transit earnings, employment and privatization

This paper uses individual worker and municipal information to examine privatization's influence on public transit workers' earnings and employment. OLS findings on labor earnings reveal that privatization is associated with an erosion of the public transit union premium. These labor earning findings do not change when correcting for privatization heterogeneity, as unobserved worker characteristics do not differ with differing levels of municipal privatization of public transit services. The employment findings reveal that union public transit workers are more likely to be employed in the public sector and this union-nonunion employment probability differential, declines with increasing levels of privatization. This employment result is interpreted as suggesting that labor cost savings from privatization can be derived from the enhanced employment of relatively low wage nonunion workers in the public sector of public transit services.