United Airlines planes are parked at their doors at O’Hare International Airport.
Photo: BRENDAN MCDERMID / REUTERS
Although Federal Reserve economists have withdrawn their line that inflation is transitory, they have continued to minimize the risk of a wage-price spiral. We wonder what they call the 14.5% increase that United Airlines agreed last week to give to its pilots until the end of next year.
Anyone who has flown recently knows that it is best to check your expectations of a punctual exit at the door. The shortage of pilots and other work problems have disrupted flights across the country. Although the flight has recovered to levels close to the pandemic, many pilots have retired. The competition for riders is fierce. A subsidiary of American Airlines recently announced a 50% pay rise until August 2024.
United are trying to keep up with competitors with their new pilot contract which includes a 14.5% increase over the next 18 months. It also creates a new eight-week maternity leave benefit, improvements to long-term disability benefits, improved overtime and the creation of a retirement plan with tax benefits, according to the United pilots union.
As generous as the supply may seem, the wage increase is not much higher than the consumer price index, which last month rose 8.6% in the last year. After inflation, the 14.5% increase represents an increase of around 1.6% in 18 months. For pilots living in Sun Belt areas where inflation is above 10%, such as Phoenix, it is a decrease in real wages if inflation stays that hot over the next year.
Workers across the economy are calling for bigger increases to offset rising prices. This could increase inflation as firms pass on higher wage costs in the price of goods and services. Air fares have already risen more than 20% from pre-pandemic levels and continue to rise.
It looks like the bond market can’t figure out how serious the Fed is in controlling inflation, but workers don’t expect to know while looking for a higher wage.
Magazine Editorial Report: The Best and Worst of the Week by Kim Strassel, Kyle Peterson and Dan Henninger. Images: Composition: Mark Kelly
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It appeared in the June 27, 2022 print edition.