The legislated adjustment of labor disputes: An empirical analysis, 1880-1894.

Abstract

The Federal government's involvement in railroad labor disputes was one of the earliest examples of government intervention in the economy. Initially, when the economy was crippled by railroad strikes in the late nineteenth century, the government stepped in and crushed them with troops and injunctions. The Federal government's other approach was legislative, beginning with the passage of the Arbitration Act of 1888. As the first piece of Federal arbitration legislation, it had a significant impact on the development of subsequent labor legislation, such as the Railway Labor Act of 1926 and the National Labor Relations Act in 1935. Several methods are used to assess the impact and importance of the Arbitration Act. First, the political economy of the Arbitration Act is examined. Railroad owners opposed this legislation, fearing it would hinder their ability to hire, fire, and deal with striking workers. Organized labor favored arbitration, viewing such government intervention as providing a mandate that would compel, even force, employers to recognize unions. The ability of these constituent groups to influence their elected representatives is quantitatively tested using a simple model of legislative choice. The Arbitration Act was viewed as harmless, and even useless, by many Congressmen. Whether this legislation was effective is an important investigation. Two approaches are used to assess the impact of the legislation. The first uses a monthly index of railroad stocks to investigate how the expected future profitability of railroad firms was affected. The price of railroad stocks fell, which implies that the legislation was expected to reduce future profits. Investors felt that this legislation did not serve the best interests of railroad capital. The second approach examines how the passage of arbitration legislation affected strike frequency and duration. The analysis of the impact of the Arbitration Act confirms that the mere presence of arbitration procedures can lead to an increase in strike activity. Evidently, the relative costs of railroad strikes were lowered, thus increasing strike activity. The imposition of legislated bargaining procedures can produce unexpected results, as illustrated by the Arbitration Act's effect on railroad strikes.