Airlines are suing to block an increase in the minimum wage at Seattle airport to $11.22 per hour in January 2and then $13 in 2017.
I won’t delve into the legal merits of the case, just into the unique circumstances of airports. Seattle itself has voted to raise its wages even higher than this, and we’ll see what effects that has, but I suspect that an airport can do it with far fewer negative consequences.
An airport is a huge capital investment in an airport, that’s not easily moved or replicated. So passengers (as customers) and airlines (as employers) are captive — there are alternative options, but they’re limited. And many of the jobs don’t have simple substitutes.
At a certain margin airports can probably force higher wages without corresponding reductions in employment. Surely there are tradeoffs, and airlines will be less likely to expand employment and more likely not to replace workers and try to operate short-staffed. But on the whole you can do it.
There are limits — not through employee wages, but massively high capital costs, Miami has become one of the most expensive airports in the country for airlines to operate. Low cost carriers fled to much-cheaper Ft. Lauderdale. Where there’s a nearby alternate airport, airlines and passengers to do have a choice. What happens at Miami, though, is that American Airlines earns an above average rate of return because competition has left and more or less ceded the market that doesn’t shift to Ft. Lauderdale. Without competition, having pushed low cost carriers out, fares rise.
High costs do mean less competition and higher fares in Miami. In Seattle the story is a little different. Driving – and long drives to alternate airports – are still options, but there aren’t the easy substitutes like Ft. Lauderdale and Miami offer.
And net net Seattle sees more service than in years’ past because it was arguably under-served before. Delta has built a hub there, presumably knowing going in the kinds of costs it would face, though they’re a party to this lawsuit to block the forced increase in wages.
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