In the News 2014
CNN Money, November 27, 2013
FORTUNE — Advocates of a higher minimum wage in the small city of SeaTac, Wash. declared victory Tuesday in a tight mail-in vote on a proposal that will give hospitality and transportation workers in and near Seattle-Tacoma International Airport paid sick leave, wage theft protection, and hourly pay of $15.
That sum — staggering by minimum wage standards and more than twice the federal rate of $7.25 — eclipses the highest city and state rates, San Francisco's $10.55 per hour and Washington State's $9.19, respectively. But SeaTac's new rate is not the highest minimum wage in the country. In fact, it lands in the middle of the pack among airports, which pay hourly workers well into the double digits, like St. Louis International Airport's $15.92 per hour, and Los Angeles LAX's rate of $15.37.
In a country where the suggestion of a $10 federal minimum wage ignites controversy, some airports have become hotbeds of living wage advocacy and have managed to pay their workers much more.
How and why?
Mainly, it's the "importance of being unimportant," says Chris Tilly, director of UCLA's Institute for Research on Labor and Employment. Labor costs, as part of overall airline costs, are very low, meaning pay hikes make only a minimal dent in airlines' bottom line, says Ken Jacobs, chair of the Labor Center at UC Berkeley. And the cost of increasing airport workers' wages can easily be passed on to travelers — a captive audience in the isolated economy of an airport terminal, where normal rules about market competition don't necessarily apply.
If employers passed on all additional labor costs through price increases, the roughly 16 million passengers traveling through Sea-Tac Airport every year would only see an average increase of $1.78 in combined ticket, food, and retail prices, according to a report by Puget Sound Sage, a coalition of labor, faith, and community organizations that supports the Sea-Tac wage initiative. The average air travel trip from Seattle costs consumers $363.
Airports are run by public officials who are more susceptible to pressure to raise wages from the labor unions and community groups that often lead these initiatives than, say, a corporation like Wal-Mart (WMT), which answers to shareholders, not constituents. Those factors have made it easier for a string of airports to implement living wage ordinances, starting in earnest at San Francisco International Airport (SFO). In 2000 it adopted what it called a Quality Standards Program that established compensation, recruitment, and training standards for airport employees, including a minimum wage of $12.93 per hour.
Following the deregulation of the airline industry in the 1970s, airlines began to outsource some of their on-the-ground operations to contractors, which decreased wages. Airport workers employed by contracted companies made 59% to 73% of the pay earned by airline employees with the same occupation, according to a 2003 report on the SFO initiative by the Institute of Industrial Relations at UC Berkeley. Fears that low worker wages and high employee turnover would cause safety and security lapses prompted SFO to make a change.
The effect was immediate. According to the Berkeley study, worker turnover fell by 60% among employers at the airport, which gave average wage increases of 10% or more; it fell by 34% at all companies at the airport surveyed for the report. The overall decrease in turnover saved employers $6.6 million annually and improved overall work performance.
In addition to LAX and St. Louis International, other airports have adopted living wage ordinances similar to SFO's. San Jose International Airport workers make a minimum wage of $14.71, workers at Syracuse's airport are paid $14.68, employees at Miami's airport earn $13.82, and at Oakland International, the hourly rate is $13.75.
Despite living wage efforts like the SeaTac initiative — which is set to become official policy on January 1, unless a lawsuit filed by Alaska Airlines stops it — low pay at the nation's travel hubs is still prevalent. From 2002 to 2012, the percentage of baggage porter jobs that have been outsourced has tripled from 25% to 84%, and the same percentage (84%) of vehicle and equipment cleaning jobs are hired through outside companies, up from 40%. The outsourcing of jobs has eroded wages, according to an October 2013 report by the UC Berkeley Center for Labor Research and Education and Simon Fraser University that was funded by the Service Employees International Union. The average real wages for a baggage porter, for instance, fell by 45% over the past decade, from the equivalent of over $19 an hour to $10.59 in 2012 dollars.
Last week, John Martin, director of SFO, wrote an op-ed in the New York Times supporting the SeaTac wage hike given the success of the similar program his airport adopted 13 years ago. "Airport safety is not well served when exhausted employees have to work two jobs just to make ends meet," he wrote. "The program's success rate [at SFO] can be measured by the extraordinarily high retention rate of our employees. A living wage means a fighting chance."