United Airlines planes stand at their gates at O’Hare International Airport.
photo:
Brendan McDiarmid/Reuters
While Federal Reserve economists have retired their line that inflation is fleeting, they have continued to play down the risk of a wage-price spiral. We wonder what they call the 14.5% increase that United Airlines agreed last week to pass on to its pilots by the end of next year.
Anyone who has flown in lately knows that they had better check their expectations of a timely departure at the gate. Pilot shortages and other labor issues have disrupted flights across the country. While flying has approached pre-pandemic levels, many pilots have retired. Competition for pilots is fierce. A subsidiary of American Airlines recently announced a 50% pay increase through August 2024.
United is trying to keep up with competitors with its new pilot contract that includes a 14.5% increase over the next 18 months. According to the United Pilots Union, it also introduces a new eight-week maternity leave benefit, improved long-term disability benefits, increased overtime and the creation of a tax-advantaged retirement plan.
Generous as the proposal may sound, the wage increase is not much compared to the consumer-price index, which last month rose 8.6% over the previous year. After inflation, a 14.5% increase equates to an increase of about 1.6% in 18 months. For pilots living in Sun Belt areas where inflation is running hotter than 10%, such as Phoenix, this is a drop in real wages if inflation continues to warm over the next year.
Workers across the economy are demanding large wage increases to compensate for rising prices. This can further exacerbate inflation as companies pass in the price of goods and services with higher wage costs. Airfares have already increased by more than 20% from pre-pandemic levels and continue to rise.
The bond market can’t figure out how serious the Fed is about controlling inflation, but workers aren’t waiting to find out because they want higher wages.
Journal Editorial Report: The best and worst of the week from Kim Straussell, Kyle Peterson and Dan Henninger. Images: Composite: Mark Kelly
opinion | United Airlines inflation alert
United Airlines planes stand at their gates at O’Hare International Airport.
photo:
Brendan McDiarmid/Reuters
While Federal Reserve economists have retired their line that inflation is fleeting, they have continued to play down the risk of a wage-price spiral. We wonder what they call the 14.5% increase that United Airlines agreed last week to pass on to its pilots by the end of next year.
Anyone who has flown in lately knows that they had better check their expectations of a timely departure at the gate. Pilot shortages and other labor issues have disrupted flights across the country. While flying has approached pre-pandemic levels, many pilots have retired. Competition for pilots is fierce. A subsidiary of American Airlines recently announced a 50% pay increase through August 2024.
United is trying to keep up with competitors with its new pilot contract that includes a 14.5% increase over the next 18 months. According to the United Pilots Union, it also introduces a new eight-week maternity leave benefit, improved long-term disability benefits, increased overtime and the creation of a tax-advantaged retirement plan.
Generous as the proposal may sound, the wage increase is not much compared to the consumer-price index, which last month rose 8.6% over the previous year. After inflation, a 14.5% increase equates to an increase of about 1.6% in 18 months. For pilots living in Sun Belt areas where inflation is running hotter than 10%, such as Phoenix, this is a drop in real wages if inflation continues to warm over the next year.
Workers across the economy are demanding large wage increases to compensate for rising prices. This can further exacerbate inflation as companies pass in the price of goods and services with higher wage costs. Airfares have already increased by more than 20% from pre-pandemic levels and continue to rise.
The bond market can’t figure out how serious the Fed is about controlling inflation, but workers aren’t waiting to find out because they want higher wages.
Journal Editorial Report: The best and worst of the week from Kim Straussell, Kyle Peterson and Dan Henninger. Images: Composite: Mark Kelly
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Appeared in the print edition, June 27, 2022.