Wage Determination in the U.S. Airline Industry: Union Power under Product Market Constraints
The paper analyzes wages in the U.S. airline industry, focusing on the role of collective bargaining in a changing product market environment. Airline unions have considerable strike threat power, but are constrained by the financial health of carriers. Since airline deregulation, compensation has waxed and waned in response to the industry’s economic environment. Airline workers capture sizable rents following good times and provide concessions following lean times. Compensation at legacy carriers has been restructured; it remains to be seen if compensation will continue its long-run movement toward opportunity costs. Evidence from the CPS for 1995-2006 shows that wage premiums for airline industry workers remain, particularly for pilots, with existing premiums almost entirely a union phenomenon. Much of the gap in wage scales between major and mid-size carriers was erased in the mid-2000s concessionary cycle, but these rates remain much higher than rates at regional carriers. Compensation levels at regional carriers may approximate opportunity cost – the compensation necessary to attract and retain qualified employees throughout the industry. Because unions retain bargaining power at the major carriers, wages are likely to head upward as carriers’ financial health returns. Such wage levels may or may not be sustainable in the inevitable next downturn.
|Date of creation:||Oct 2006|
|Date of revision:|
|Publication status:||published in: D. Lee (ed.), Advances in Airline Economics, Vol. 2: The Economics of Airline Institutions, Operations and Marketing, Elsevier 2007|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Leslie A. Nay, 1991. "The Determinants of Concession Bargaining in the Airline Industry," ILR Review, Cornell University, ILR School, vol. 44(2), pages 307-323, January.
- Gary M. Fournier & Monica E. Hartmann & Thomas Zuehlke, 2005. "Airport Substitution by Travelers: Why do we have to drive to fly?," Working Papers wp2005_09_01, Department of Economics, Florida State University.
- Barry T. Hirsch & David A. MacPherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
- Barry T. Hirsch & Edward J. Schumacher, 2004.
"Match Bias in Wage Gap Estimates Due to Earnings Imputation,"
Journal of Labor Economics,
University of Chicago Press, vol. 22(3), pages 689-722, July.
- Hirsch, Barry & Schumacher, Edward J., 2003. "Match Bias in Wage Gap Estimates Due to Earnings Imputation," IZA Discussion Papers 783, Institute for the Study of Labor (IZA).
- Christopher R. Bollinger & Barry T. Hirsch, 2006.
"Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching,"
Journal of Labor Economics,
University of Chicago Press, vol. 24(3), pages 483-520, July.
- Bollinger, Christopher R. & Hirsch, Barry, 2005. "Match Bias from Earnings Imputation in the Current Population Survey: The Case of Imperfect Matching," IZA Discussion Papers 1846, Institute for the Study of Labor (IZA).
- David Card, 1996. "Deregulation and Labor Earnings in the Airline Industry," NBER Working Papers 5687, National Bureau of Economic Research, Inc.
- Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2384. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.