Date: 12/11/2022
Author: Mr. X
President Joe Biden has made his support for organized labor central to his self-created political image. Occasionally, he’s even been referred to as “Union Joe.” However, now some railway workers are furious with the president.
National Public Radio reported that some rail workers say President Biden “turned his back on us.” The New York Times quoted one worker who accused the president of catering to the “oligarchs.” A columnist at the left-wing Guardian said, “Biden decided to sell out workers in the biggest labor battle of his administration.” The decidedly more conservative N.Y. Post made essentially the same case from the right. “Union Joe suddenly turns into Union-Buster-in-Chief – to save himself” it said. Still, even if President Biden did cynically “save himself,” he also saved the U.S. economy an estimated $2 billion a day. If there was a railway strike, it would destroy any hope of the United States avoiding a recession.
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Not long afterward, the president said he was providing $36 billion to the Central States Pension Fund. “Union workers and their families are finally able to breathe a huge sigh of relief, knowing that their hand-earned retirements savings have been rescued from steep cuts,” said one government official. One might also say that President Biden was trying to rescue his old political reputation.
The Senate approved a bill halting the strike by an 80 to 15 vote. After that, President Biden may have issued the most remarkable signing statement in American history. He sounded like a man utterly despising himself for what he was doing.
“Look, I know this bill doesn’t have paid sick leave that these workers, frankly every worker in America, deserves, but that fight isn’t over. I didn’t commit we were going to stop, that just because we couldn’t get it into this bill that we were going to stop fighting for it. I supported paid sick leave for a long time and I’m going to continue that fight until we succeeded.”
In 1992, President Biden spoke out against legislation like this even during a railway strike. A Senator at the time, he said “we need to restore a measure of balance to these negotiations.” He voted with just five other senators against halting the strike.
However, now he’s the president. So his tune has changed. He said the American economy depends on this infrastructure.
“Our nation’s rail system is literally the backbone of our supply chain. So much of what we rely on is delivered on rail, from clean energy to food and gas and every other good. A rail shutdown would have devastated our economy. Without freight rail, many of our industries would have literally shut down.”
He isn’t wrong, though it puts him in an ideologically awkward position. It’s especially bad because the House version of the bill also mandated sick leave for railway workers. This was left out of the Senate bill after it was defeated in a 52-43 vote. Thus, Senator Bernie Sanders (D-VT) and a coalition of progressives are pushing President Biden to guarantee railway workers sick days via an executive order.
Again, giving President Biden’s own statements, why shouldn’t he act to mandate sick leave, something he says he supports? However, if that creates the possibility of another railway strike, it’s a position he can’t afford. If the economy tanks now and the GOP can nominate a strong candidate in 2024, President Biden remains vulnerable.
While former president Donald Trump’s campaign has stumbled out of the gateway, most Americans polled don’t want Donald Trump or Joe Biden to run again in 2024.
At the same time, Joe Biden needs the union organizers he’s now antagonized. “Rail carriers make record profits,” tweeted Teamsters President Sean O’Brien. “Rail workers get zero paid sick days. Is this OK? Paid sick leave is a basic human right. The system is failing.” Some Republicans, notably possible presidential candidate Marco Rubio, are also trying to outflank President Biden on workers’ rights. “I will not vote to impose a deal that doesn’t have the support of the rail workers,” said Marco Rubio.
The reason the president was able to stop the strike is via the Railway Labor Act. This act, dating from the 1920s and updated during the New Deal, provides protection for workers but ultimately lets the federal government prevent strikes. In 1936, it extended to airlines. And there’s similar labor unrest in that critical sector.
Delta Airline pilots recently voted to authorize a strike. The CEO of Delta Airlines recently said on NBC that there was “no possibility they [the pilots] could go on strike… at Thanksgiving, Christmas, or any other time.” He also said it would be “against the law of the country if they did.” The Air Line Pilots Association (ALPA) fired back that “#DeltaPilots are prepared to fully exercise their rights under the law, if necessary, and if there is no agreement. #ReadyToStrike #DeltaPilotContractNow”
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ALPA has been at the vanguard of efforts to win more pay for pilots. On September 1, the union held an “informational picket” nationwide. It was a shot across the bow to airline companies that it would be willing to go to the mat unless there were concessions.
The danger at Delta has faded as the company and ALPA agreeing “in principle” to a deal that would give pilots a 31% pay raise over three years, including an 18% immediate raise upon signing.
ALPA scored a pay raise for its pilots in negotiations with Spirit, which offered a reported 40% raise to pilots late last week. ALPA also won major concessions from Alaska Airlines, which had to raise pay to meet industry standards and offer far more pay per hour. If other airlines raise their pay scales, Alaska Airlines must too.
American Airlines and its own pilots’ union have also had some disagreements. The Allied Pilots Association (APA), which represents America, is reportedly studying a merger with ALPA. One of the proposed reasons is why is the need for “pilots’ unity.”
A key advantage pilots enjoy is the massive labor shortage. Airlines are moving quickly to increase the number of pilots. United, American, Delta, Southwest, Hawaiian, JetBlue Mesa Air Group, Republic, Cape Air, and SkyWest have all set up training programs designed to increase their supply of pilots. Nontheless, the industry faces a reported pilot shortage of about 8,000 people. Even before the pandemic, it was a tight labor market, but during the COVID-19 pandemic, airlines desperately needed to cut expenses.
Many pilots nearing the federally mandated retirement age of 65 took lucrative pay packages to exit the industry. Now that demand for travel has soared, there is a full-fledged labor shortage.
Some unions are still in negotiations with management, though the wave of recent deals mean the trend is clear. Pilots will enjoy significant raises across the industry, as there are simply not enough trained professionals to go around. This will keep travel costs high, creating a cascading inflationary effect across the entire economy. It’s especially costly because of the nature of some of these agreements. For example, Delta’s deal reportedly ensures that its pilots would always earn at least 1% more than pilots at American and United. Rather than a race to the bottom for labor prices, pilots can enjoy management racing to the top on wages.
Passengers may not be so happy.
From September 2021 to September 2022, the cost of flights increased by more than 40%. The number of flights is also limited because of the staff shortages. After the government bailed out airlines during the COVID-19 pandemic, the industry is in no position to complain or call in government help if there’s a danger of a strike.
Airlines seem to be willing to do what it takes to keep pilots from picketing. However, the costs will be passed along to consumers, and ultimately fuel inflation. More importantly, pilots have all the leverage – for now. Pilots from Delta, United, and American have all said they’d be willing to strike during the holiday travel season. It’s not just America facing this problem either – British border force staff are expected to go on strike, increasing lines at airports in the United Kingdom. Lufthansa only staved off a strike by passing a large pay increase in September.
The potential for a strike in the airline industry in the short-term is slim. However, that’s because management is desperate and signing whatever it needs to.
At the same time, it’s trying to recruit more pilots, even if that means reducing training. The FAA rejected an attempt by management to reduce training hours in September so the pilots will retain their short-term advantage. However, in the years to come, as training academies push out more graduates, the airlines may try to re-negotiate these generous deals as they regain some of their bargaining power. It would be the labor union equivalent of the “Thucydides Trap” – the rising power of management will attempt to corral the falling power of pilots unions’.
The result will be pilots organizing not just to keep their pay raising but to increase qualifications and limit the entry of new pilots.
That’s a stance that’s likely to be popular with the public – no one wants untrained pilots. The result is a time bomb within airlines for the long term, as there is no easy answer for them to control costs. The Biden Administration – or another future president – may find itself stopping another strike, handing the airline industry another subsidy, or both. Like with railways, the alternative is simply too disruptive to be tolerated.
Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for RogueInvesting.com to bring you news on what those with power are debating, planning, and doing.
