Most truck drivers experience economic pressure in the form of low pay rates, no pay for non-driving work time, and long work hours. Unpaid working time, leading to low effective pay rates, encourages drivers to work excessive hours to pursue target earnings, which leads to fatigue and working time violations, and ultimately raises crash rates. This paper explores the complex relationship between regulatory violations, pay incentives, and crashes, to determine the effects of economic forces on carrier safety. We use data from 13,904 intrastate trucking companies in the United States, as well as median hourly truck driver wages from data published by the Bureau of Labor Statistics. We find that controlling for observed regulatory violations (hours of service, unsafe driving, and substance abuse), at the mean, 1% higher driver wages are associated with 1.04% fewer crashes. Stated differently, a 10% wage increase would be 5 times as effective as a 10% reduction in ‘unsafe driving’ or 2.5 times as effective as a 10% reduction in ‘driver fitness’ violations. This unit elasticity between driver pay and crashes suggests that higher compensation will bring direct and commensurate worker and public safety benefits. Every unit in higher pay, at the mean, will lead to a corresponding unit improvement in safety. Our findings suggest that the most effective way for regulators to pursue their mission to reduce crashes, fatal or otherwise, would be to collect firm-level data on truck driver compensation and allow their methodology to follow sound science.

We generalize existing fair wage models to allow effort to vary over the business cycle. When effort is variable, wage fluctuations are partially compensated for by endogenous effort fluctuations, so that the sensitivity of marginal cost to output and employment variations is decreased. This new mechanism decreases the need for sluggishness to explain the observed high inflation persistence.

We study the influence of wage differential on the emergence of endogenous fluctuations. In this way, we introduce a dual labor market, based on the Shapiro–Stiglitz efficiency wage theory in an overlapping generations model. We show that wage inequality is a source of endogenous fluctuations. Indeed, a sufficiently strong wage differential leads to the occurrence of cycles of period 2 and local indeterminacy. Moreover, in contrast to several existing contributions, these results depend neither on increasing returns to scale nor on the degree of capital–labor substitution.