Why Airports are at the Forefront of Minimum Wage Increases (and Why Philadelphia’s Just Went Up 65%)

Philadelphia airport has passed a $12 minimum wage. The previous minimum was the state’s $7.25 per hour.

And that’s not all. The wage provision also covers employees of all the airlines’ vendor companies — a population that has been hard to reach, as the industry has contracted out basic services, a shift that has helped depress wages for airport workers through the 2000s. And it includes a provision requiring airport employers to remain neutral in any union drives, which should help the group pushing hardest for the changes — the Service Employees International Union — finally organize the airport’s contracted workforce.

…And it’s just one of a string of victories pushed by a couple big unions that have leveraged public control of airports to win concessions from airlines that have proven difficult to achieve in purely private sector industries.

San Francisco, Los Angeles, and Seattle airports have moved in similar directions. Minneapolis requires paid sick leave.

It’s no coincidence that airports are at the vanguard of pushing for higher minimum wage laws. An airport is a huge capital investment that cannot easily be moved, and demand for services at the airport like wheel chair assistance is pretty inelastic.

For Philadelphia’s airport, its biggest customer is American Airlines. And for American the major competitive option is New York JFK, which is already an expensive place to operate. So Philadelphia can probably do this.

The airport extracts higher costs, and has chosen to do this in the form of higher wages for workers. They could have done it in the form of higher rents, or terminal improvements funded by airline tenants. US airports are politically-controlled, so their priorities can be politically set. And unions have made wages a priorities for the political decision-makers at airports.

Labor union UNITE-HERE even has a role to play in Greece, as the government contemplates reforms (such as privatizing airports and other tourism-related businesses to raise cash) versus possible exit from the Euro.

[UNITED-HERE] is now pushing the concessions operator, the German company Fraport, to recognize the union [at BWI] — but so far, Fraport hasn’t been open to talking. He’s even talked to lawmakers in Greece, which is considering contracting with Fraport to run its national airports, to tell them about the labor strife still ongoing in Baltimore in hopes of pressuring the company to come to the table.

I’ve been through extensive processes in Arlington, Virginia where the County extracts concessions from developers and prioritizes how it seeks to use those concessions. They’re more or less a line item on a project’s costs, and whichever priority is in political favor gets it. This process is less transparent than if it were all done as a cash payment and an appropriation.

There’s some price above which the airport is no longer cost competitive and tenants get pushed elsewhere. The low cost carriers left Miami for Fort Lauderdale because construction costs pushed landing fees too high. That ironically made the airport more attractive for American, becuase the higher costs meant less competition and greater pricing power. Fort Lauderdale isn’t a perfect substitute, even if jetBlue can support Port-au-Prince operations there.

Of course, American just asks that they don’t get singled out with wage increases.

“We’re fully supportive of wage increases, and we’re always working with our vendors to make sure they’re paying fair wages,” says American Airlines spokesperson Casey Norton. But when the community is better paid, it makes it easier, rather than just isolating it on one particular work group or industry, as far as purchasing power.”

The combination of political decision-making with geographic monopoly and large, immovable investment make airports one of the most strategic places for focus minimum wage campaigns. It’s a brilliant tactic at least in relatively blue states.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. “and demand for services at the airport like wheel chair assistance is pretty inelastic”

    Gary, what did you mean by this? When we use wheelchair assistance, we tip out the wazoo to the individual provider. How does this fit with your “revenue” reference? No restaurant server etc. (on tips) will receive such a benefit from min wage increase, will they? Or I’m missing something… This is approaching the Vegas hotel bellcaps who collect from everyone piling into taxis.

  2. @colleen inelastic means the airlines will contract for the service regardless of the wage (at least at any margin not so cost prohibitive where it changes the economics of the flight)

  3. Some years back, a livable wage joke was approved by the voters of the City of St. Louis. Immediatedly, the Chamber of Commerce went to court and got the burden taken off the backs of private businesses. However, it’s still effective at Lambert International Airport, which is owned and operated by the city, although miles outside the city limits. Also there are requirement for set asides (25% MBE and 5% WBE) when it’s contract time for services and goods at Lambert. http://flystl.com/BusinessOpportunities.aspx

    I wouldn’t be surprised if there is a shift to usage of temp service companies to find new workers and provide barriers between the evil employers and the two socialist unions.

  4. Good job Philly. The more companies’ pay and benefits actually meets the needs of workers the less taxpayers have to subsidise business. Don’t give me any of this BS about an unfair burden on business. Underpaying people ends up being an unfair burden on someone and I’d rather pay through payments for goods and services than through my taxes.

  5. While i am not a big fan of the government regulating pricing, now that these cities are passing these things, i suggest we finally stop the ridiculous custom of tipping for services that are paid in full.

  6. Minimum Wage was the second song played at my wedding. Crazy dancing for 45 seconds ensued.

  7. @Ed: It’s not BS to suggest that the market sets prices for how much a worker’s time is worth. How do you not recognize this? Surely you understand this basic principal of economics.

    Or are you suggesting that all workers “deserve” a so-called living wage simply because they decide to do *any* form of work? What qualifies them to receive this? Just showing up to the job? Do they have to be productive? Is it necessary that the work the do actually produce more value than they are being paid? How would we determine this? Perhaps with say….a free market setting their wage? See what I did there?

    To further show why your ideas make no sense, imagine you’re the employer now. You decide to hire someone to literally just sweep the floor in your office. Should you have to pay them enough money to live on because of this? If not, why not? How do you draw the distinction? What cogent system would you suggest, other than the one we have where the amount of money a person is paid is directly related to the value they provide to the employer?

    Or did you forget that’s how we set a person’s wages? And did you forget that employers are often people just like you, with finite resources, and when they are forced to pay people more than the value they are producing, then they simply won’t hire those people at all in the first place (thus destroying jobs). An entire class of potential businesses, and jobs, and start ups, and interesting things, are constantly being destroyed, and constantly not happening, because people like you support idiotic minimum wage laws.

    You can’t measure these things that aren’t happening, because they aren’t happening. You can’t get any data on it, because it’s something that’s being prevented. But it’s logical. You should be able to understand this if you even begin to think like an entrepreneur.

    Please stop spreading ideas that hurt the lowest earners among us.

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