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Wage Inequality in the Airline Industry - Essay Example

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Wage Inequality in the Airline Industry

For example, in the trucking industry, after deregulation union wages fell, whereas nonunion wages did not change significantly. This contrasts to the situation in the airline industry, where the wages of nonunion workers after deregulation have "eroded" (Bratsberg et al, 2001). The entry of new "non-union, low-wage" companies into the market forced existing companies to "extract wage concessions" from their employees, if they wanted to remain competitive (Deller, 2002). In this way competition with other private airline companies and governmental airline suppliers, forced wages downward to contain costs increases.
Still, because of high industry unionization (Bratsberg et al, 2001), the unions retained considerable bargaining power, hence they were more effective in preserving high wages, and the union wage advantage increased during the years after the deregulation.
Literature review has not identified one single method for determining wage inequality for the airline industry. Instead, various research papers investigate into different aspects that explain wage levels and estimate wage inequality in the airline industry by making comparisons between different worker/employee groups in the industry.
One such paper distinguishes between wage levels of union, and nonun...
One such paper distinguishes between wage levels of union, and nonunion workers, by assessing "the effect of deregulation on union power" (Bratsberg et al, 2001). Eventually, union power influences the wage levels of similar categories of workers who differ in their employment relations (union versus nonunion workers). According to the article, after deregulation, union wages have been less responsive to this change, whereas non-union wages have decreased significantly (Bratsberg et al, 2001) due to competitive pressure on costs. This has increased "the union premium" and has created greater wage inequality in the industry.
Another research project undertaken by Michael Reich (2003) assesses wage policies at the San Francisco International Airport - SFO - for eighty employers in security areas or who perform security functions. The paper distinguishes between different level service workers, defining "security screeners, baggage handlers, fuel agents, customer service agents []" as the "lowest paid [non-managerial level] airline service workers". The research ascertains wage inequality based on company of employment, whereas lower wages are concentrated among employees of airline service contractors, contrasted by (in-house) airline companies. Additionally, Reich (2003) determines a benchmark minimum wage level (similar to the relative poverty line) of $10.00 per hour and comments that the introduction of new policies that decrease wage inequality have created significant decline in jobs turnover. This has created the positive effect of reduced pay inequality on service levels, worker motivation and productivity (Reich, 2003).
1. Bratsberg, B. & Ragan J. (2001) "Changes in the Union Wage Premium ...Show more


One major event, or rather a global market tendency increased wage inequality in the airline industry over the past twenty years, this is industry deregulation. According to Deller (2002), deregulation in the airlines industry is one of the most striking examples of industrial deregulation and has major impact, among many things, on the industry competitive situation and relative wage levels.
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