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May 2003, Vol. 126, No.5
Regulatory reform and labor outcomes in the U.S. electricity sector
M. Scott Niederjohn
The last 10 years have seen many States aggressively pursuing the restructuring of their electric utilities. These reforms were motivated by a number of Federal Energy Regulatory Commission (FERC) orders that encouraged competitive markets for wholesale electric power.1 While the effects of these reforms on the product market (and competition) have been widely studied, there is a dearth of research examining the effect of regulatory reform on the U.S. electricity sector’s labor market, which employs more than 300,000 highly skilled workers. This heavily unionized workforce operates and maintains the country’s critical electrical infrastructure that both families and businesses rely on for their daily activities.
This study explains the effect of electricity deregulation on this sector’s workforce by addressing several factors. After initially reviewing the recent history of the U.S. electricity sector’s regulatory movement, the study briefly reviews some of the theoretical background on regulatory reform. Then, data is analyzed on employment, earnings, and unionization in the U.S. electricity sector—before and during the regulatory reform movement, which is still underway. These results are compared with similar results for other previously restructured industries.
The data for the electricity sector reveal employment reductions that are associated with regulatory reform. The findings also indicate that earnings have not been negatively affected by this restructuring, unlike other sectors examined. In fact, when compared with the earnings of similar workers, the industry earning premiums for electricity-sector employees have actually increased, while the level of unionization in this sector has drifted down. These results are particularly significant, as this is the first deregulated industry to show such contrasting earnings and employment patterns.
This excerpt is from an article published in the May 2003 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 These regulatory orders include the following: 1978 PURPA Act, which mandated that utilities must purchase electricity from nonutilities at their avoided cost; 1992 EPACT Act, which opened the transmission system to nonutilities; 1996 FERC Order 888 and 889, which established wholesale electricity markets for competition.
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