In recent decades, the union wage differential has decreased in many industries, including trucking services. Between 1978 and 1996, the union differential decreased from 40 percent to 23 percent. The deregulation of the industry in the 1980s allowed many small firms to enter the market, and many of these new firms were not unionized. As a result, the demand for union truckers decreased, and unions faced a tradeoff between wages and employment. If they maintained the relatively high union wage, total employment of union truckers would decrease by a large amount. In contrast, if they tried to maintain the same level of union employment, union truckers would be forced to accept much lower wages.
Figure shows the response of union truckers to the entry of nonunion firms. In 1978 the union wage was $20 per hour and union employment was 526,000 truckers (point a). The entry of nonunion firms shifted the demand curve facing union truckers to the left. If the wage had remained at $20, total union employment would have dropped by half, to 263,000 workers (point b). Rather than accepting such a large reduction in union employment, truckers accepted a wage of $14 per hour, and total union employment in 1996 was 439,000 (point c). In other words, union truckers accepted lower wages in exchange for more jobs or a smaller reduction injobs.

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Initial demand New demand $20 6 14 263 439 526 Number of union truckers (1.000)