No union for the unions

I know that my liberal friends and readers think of me as a union basher who just can't stand the thought of workers claiming a bigger share of the pie. I'm actually not particularly anti-union, and to the extent that I do have problems with unions, it is not because they seek higher wages and benefits for their members. Rather, it is because they introduce serious structural rigidities into the economy. Witness the problems that Delta is having merging with Northwest because they can't get the pilots--who are all in the same union--to agree on a seniority structure.

The Delta and Northwest pilot groups, who were asked by management to negotiate a seniority agreement before a merger deal could be announced, share a problem with their contentious colleagues: there is an age mismatch, with Delta employing the younger group.

On Tuesday, Delta’s chief executive, Richard Anderson, sent a memo to update employees on merger talks. Without mentioning Northwest, the memo said, “To date, we have not arrived at a potential transaction that meets all of our principles.” Among the principles Mr. Anderson listed was “that the seniority of our people is protected.”

Mr. Anderson said in the memo that Delta would “continue to look at strategic alternatives” while also pushing forward with the airline’s standalone plan. A spokeswoman, Betsy Talton, would not elaborate.

Douglas Steenland, chief executive of Northwest, also sent a note to workers Tuesday, and he, too, took a cautious tone in addressing a merger, while not naming Delta.

“We continue to believe that consolidation among the network carriers is inevitable,” Mr. Steenland said in the memo. Among other things, a merger would need to “provide greater long-term security and growth opportunities for our employees,” he added. “We continue to consider strategic alternatives based on these criteria.”

An age mismatch raises the stakes in any melding of seniority lists, with the potential for junior pilots to leapfrog more senior ones and take away more lucrative and attractive assignments. The lists are used to decide who is a captain and who is a co-pilot, pay rates, work schedules, how big an airplane a pilot gets to fly, and who is laid off first in a downturn.

“Seniority — it’s very sacred ground,” said Jack Stephan, who heads the Air Line Pilots Association local for the 2,700 pilots from the old US Airways side of that merger.

Even if union leaders at Northwest and Delta agree to a seniority plan, clearing a path for the largest airline merger ever, the deal could be scuttled months later if rank-and-file pilots decide the plan treats them unfairly.

Comments

Managers, of course, never consider their own interests when negotiating a merger, so deals never fall apart over who gets to be CEO or anything like that.

Posted by Not Prince Hamlet | February 27, 2008 4:11 PM

There is also a major problem of disincentives when everybody gets paid the same wage as a function of how many years they put in. Rather than rewarding the most productive workers with the highest wages. But I would assume that falls under the structural rigidity argument.

Posted by Fear and Loathing in Georgetown | February 27, 2008 4:42 PM

Making decisions based on senority is one of the most bizarre side-effects of unionization. I have never seen a particularly convincing argument as to why it is integral to the basic mission of unions of trying to leverage their monopoly to extract higher compensation for their members.

Why not just negotiate that $X will be spent on the wages of union members, and then let management do its job and distribute work and compensation among those workers to maximize productivity?

Yes, some managers could use that freedom to reward anti-union workers. But given that the majority of his workers are pro-union (otherwise it wouldn't be a union shop) and presuming that pro- or anti-union sentiment is uncorrelated with productivity, a manager would have to waste an awful lot of resources rewarding a factor unrelated to productivity. And given that the company is judging him on the productivity he extracts from his workers, that would be pretty dumb of him.

Even if you are still concerned that management might reward some factors other than productivity, a senority system explicitly gives zero reward to productivity, so it's hard to see how management could do worse.

(Full disclosure: I am a moderately senior professional in a large, non-union corporation. I have worked both as a manager and as a worker.)

Posted by David Wright | February 27, 2008 4:50 PM

Commercial airline unions are a racket at least as big as what goes on at Ford and GM. To put this present disagreement in perspective: In some airlines, pilots with high seniority can make well into the six figures with the possibility of retiring at 55 on a 75%+ pension plan, in exchange for working less than 60 flight hours per month. Needless to say that's going to be quite the cage match.

While it is certainly true that you wouldn't want your pilot to be any combination of overworked, unhappy with his/her job, elderly, or prone to job-hopping, the market value of a pilot's job is arguably not so great as the above compensation figures would suggest. There is a very large market of young, alert, would-be pilots who take up the sport purely of personal interest and pay their way through the various flight time requirements and aircraft certifications by working other jobs. Other would-be pilots are unable to pursue the interest because flight is a very expensive hobby and the commercial job prospects are not great, due primarily to artificial constraint created by the commercial airline unions.

Posted by anony-mouse | February 27, 2008 5:07 PM

Unions at old line airlines have a dismal track record (as do managers) but your unspoken assumption that a Delta/Northwest merger would enhance efficiency is totally wrong. Two motivations (a) hedge funds and similar speculators who got four seats on the Delta board out of chapter 11, and are hoping for a quick share price runup (b) Air France, who having already acquired KLM and Alitalia, is trying to turn the entire US-Continental Europe market into a permanent two-airline duopoly (with Lufthansa, who are behind United's interest in a merger with Continental). Every big airline merger in the past has been an economic failure and an operational mess, and no one has ever attempted one this big. There are no scale efficiencies to speak of, unless you think United and Delta are too small, and think Aeroflot and CAAC were models of efficency. The employees have taken enormous cramdowns while in chapter 11, and aren't keen to help the senior execs and hedge funds make their big paydays. They know they will take the brunt of layoffs to come (high-fare airlines are incredibly cyclical). So they are demanding that their members get a big cut of the benefits, which is what a union ought to be doing. There is no legitimate business justification for any of these airline mergers.

Posted by Hubert Horan | February 27, 2008 5:22 PM

Megan, if you could provide even one example of where this has been an obstruction to an airline merger before, or any reason why the investors/advisors driving the push would care about it (they'll be gone within months), I might buy the argument that this disagreement is something other than a useful pretext to back out of a deal.

" In some airlines, pilots with high seniority can make well into the six figures with the possibility of retiring at 55 on a 75%+ pension plan"

anony-mouse, how about posting a copy of the pilot contract you're referring to.

Posted by J | February 27, 2008 5:29 PM

Megan, if you could provide even one example of where this has been an obstruction to an airline merger before, or any reason why the investors/advisors driving the push would care about it (they'll be gone within months), I might buy the argument that this disagreement is something other than a useful pretext to back out of a deal.

US Air. They merged with America West how long ago and they're still having problems with the seniority list. The deal got done but the union problems have been a major roadblock towards real integration. Everyone seems to be looking at that and saying 'If we can't get this taken care of up front it's not worth doing the deal.'

Posted by craig | February 27, 2008 5:40 PM

Craig, I think the request was for a time when it did happen, not when it kind of sorta a little happened if you squint your eyes just right and start with an anti-union bias.

Posted by NutellaonToast | February 27, 2008 5:56 PM

David Wright:

Making decisions based on senority is one of the most bizarre side-effects of unionization. I have never seen a particularly convincing argument as to why it is integral to the basic mission of unions of trying to leverage their monopoly to extract higher compensation for their members.

Well, you have to remember that the unions (at least in theory) ACQUIRE the monopoly by representing the interests of ALL of the workers, including the ones who don't rank well using a productivity metric. If you don't do something for the bottom 10% or 20% or 50% or whatever, then you don't get their support, and if you don't get their support, you get nothing. In theory.

For that matter, you could make the case that even the most productive do actually do better overall by standing with all of the other workers than they would by trying to negotiate for themselves. There's probably anecdotal evidence both ways. It's certainly an axiom of unionism that this is in fact the case, irrespective of whether it's actually true or not.

If you're negotiating with people whose interests are irreconcilably opposed to yours, then it makes sense to ignore the differences between yourself and the others on your side.

Rather than rewarding the most productive workers with the highest wages.

How do you measure the productivity of pilots? Meeting schedule, I suppose, or maybe even fuel economy. But those are both ripped to shreds by problems on the ground anyway. You don't particularly want them to be willing to work lots of hours. Flight hours without a crash doesn't seem like a really usable metric either.

Posted by BP Beckley | February 27, 2008 6:05 PM

BP Beckley: "How do you measure the productivity of pilots?"

Obvious measures are not useful, but that doesn't mean you throw up your hand. They say the same thing about teachers, but that doesn't "wash" with me. You can measure the minor error rate [things the pilots do wrong that don't necessarily lead to accidents]. You can measure the "accident" rate dealing with emergency situations in the simulator. It can be done. The problem is, individual performance measurement is an anathema to unions. I think BP nails it: "If you don't do something for the bottom 10% or 20% or 50% or whatever, then you don't get their support, and if you don't get their support, you get nothing. ..."

-dk

Posted by Dick King | February 27, 2008 6:33 PM

J wrote: anony-mouse, how about posting a copy of the pilot contract you're referring to.

I wonder how many laws I would have to break to actually get access to the thing.

At any rate, I know several pilots -- notably two who ultimately went into USAF, plus one working at a private corporate carrier and another working charter -- and also have a distant cousin who has narrowly avoided the periodic layoffs at Delta by working several positions, and has correspondingly gotten a good and broad feel for what goes on throughout the company (particularly the seniority riff-raff, since the seniority promotion structure tends to infect all positions outside of management). That's where I've gotten the bulk of my information about this industry.

So, you can either take more word for it, or can refuse. If you think you've got some countervailing information, it's an open discussion: lay it on.

Posted by anony-mouse | February 27, 2008 6:40 PM

And corporations don't go out of their way to "introduce serious structural rigidities into the economy(?)" In fact, one could argue that it's one of their primary missions.

Posted by gab | February 27, 2008 6:46 PM

I don't see anything particularly problematic about measuring the productivity of pilots. It would basically be anything that measures their contribution to the services provided by the airline. This would include not only various measures of their flying skills (error/accident record, on-time performance record, ability to fly different types of aircraft, ability to learn new types of aircraft, ability to train others, etc.) but also things like the amount of time they take off work and their flexibility to work a variety of schedules or to change their schedule.

Posted by Mixner | February 27, 2008 6:47 PM

libertarians are elitists

Posted by wardell | February 27, 2008 7:34 PM

Of course we are. We think for ourselves and do for ourselves. That makes us pretty darned elite in this day and age.

Posted by Rex | February 27, 2008 8:08 PM

If the pilots are only flying 60 hours per month and that's lower than they could realistically and safely fly, then that actually increases the number of pilots required. Increasing their flight hours would reduce the demand for pilots...

Posted by Earnest Iconoclast | February 27, 2008 8:15 PM

"US Air. They merged with America West how long ago and they're still having problems with the seniority list"

Yes, they did merge. Disagreement over pilot seniority integration was an obstruction to that how exactly?

"How do you measure the productivity of pilots?"

By how many seat miles a pilot generates.

"If you think you've got some countervailing information, it's an open discussion: lay it on"

Fine. Tell me what airline you're talking about and I'll get it. Or you can have your second cousin who knows somebody who worked at an airline once get it. To save time, tell him all you're interested in is section 28.

Also, here are the hiring requirements at American Eagle, a carrier whose pilots are represented by ALPA:

Minimums: 500TT/100ME

Accepting applications with 400TT and 50ME.

Were those the "artificial constraints" you were talking about? Or do you think that's an excessive amount of experience to require of an airline pilot?

Posted by J | February 27, 2008 8:16 PM

Yes, they did merge. Disagreement over pilot seniority integration was an obstruction to that how exactly?

US Airways pilots plagued by union infighting

Quote:

PHOENIX — US Airways pilots say internal squabbles over seniority are ruining a chance for better pay and benefits. The battle stems from efforts by the Tempe, Ariz.-based airline to merge its workforce with America West Airlines' following its acquisition of the former US Airways in 2005. US Airways was based in Arlington, Va.

The unions thrown together have fought over which pilot group should get more seniority. Internal frustrations peaked last week when the former US Airways union sued its counterpart at America West to overturn an arbitrator's ruling on the issue.

Posted by Mixner | February 27, 2008 8:31 PM

Quote:

"following its acquisition of the former US Airways in 2005"

They are the same company now. And the pilot seniority lists have (still) not been merged. Again, if seniority list integration is still an issue nearly three years after the merger, it was clearly not an obstruction to that merger.

Posted by J | February 27, 2008 9:19 PM

Yes, they did merge. Disagreement over pilot seniority integration was an obstruction to that how exactly?

Yes, as I mentioned the merger did get done and that was all very well and good for the short-term speculators. However the seniority issues (among other issues) are a major roadblock to integration.
Who doesn't love a good East Coast / West Coast jumpseat smackdown. This would seem to impede the realization of the benefits of the merger while fully realizing the costs. So you get what you see today - if you can't resolve these issues up front it's probably not worth doing the deal.

Posted by craig | February 27, 2008 9:20 PM

I'm far from being pro-union, but it is unfair to blame the rigidities of seniority lists on unions. Management loves them also. Seniority is a great proxy for experience, which in turn is a substitute for performance. Lazy managers would rather not rate employees, which is hard and takes time.

Even companies that pride themselves for their pay-for-performance policies have a hard time avoiding the pay-for-white-hair result. Not that there is anything wrong this this, since my hair is no longer the dashing brown it used to be.

Posted by Freddy Hill | February 27, 2008 9:30 PM

I'm curious - isn't this the free market in action? Why should anyone care how this goes down? And to solve any perceived problems, wouldn't you have to get the government involved?

Posted by ScentOfViolets | February 27, 2008 9:34 PM

"Making decisions based on senority is one of the most bizarre side-effects of unionization. I have never seen a particularly convincing argument as to why it is integral to the basic mission of unions of trying to leverage their monopoly to extract higher compensation for their members."

I am no big fan of unions but their fondness for seniority systems is not irrational. Two points.

1. People's happiness depends at least as much on whether their pay is going up or down as on its absolute level. With a seniority system, 30 year careers and senior people paid twice new hires, workers pay will go up 2.34% a year just from their gain in seniority. This makes it easier to keep everybody happy than if everybody was paid the same.

2. Unions negotiate working conditions as well as pay. Paying by productivity in a zero sum way will likely increase the pace of work making everybody's job harder with no overall gain in pay.

Posted by James B. Shearer | February 27, 2008 9:44 PM

See, I don't see the workers and the managements interests as totally irreconcilable.

In some aspects they are opposed, but which side of this supposed duality wants the company to tank because it can't compete? Seems like the unions propensity to choke the golden goose is a major downside for the workers themselves.

See GM and Ford. The unions certainly played a significant role in making sure that GM was unable to adapt by making it very expensive and difficult to close plants/lay people off/or take any risks with a gigantic benefits package bill tied around their necks.

Management is mostly to blame, imo. But unions were there too, negotiating as if Toyota et al. hadn't been gnawing away at GM for years. Now look at it; Toyota is on top, GM is bleeding like a stuck pig.

Posted by Toxicroach | February 27, 2008 9:46 PM

Shorter J: They overcame the obstruction, therefore it wasn't an obstruction.

You're hilarious.

Posted by Mixner | February 27, 2008 9:55 PM

1. People's happiness depends at least as much on whether their pay is going up or down as on its absolute level. With a seniority system, 30 year careers and senior people paid twice new hires, workers pay will go up 2.34% a year just from their gain in seniority. This makes it easier to keep everybody happy than if everybody was paid the same.

This doesn't make sense to me. If I work much harder and get much more done than someone who's been on the job 10 years longer than me, and who has been a slacker the whole time, but who gets paid signifcantly more than me just because he's been on the job longer, why is that supposed to keep me happy? I wouldn't suggest that "paying everyone the same" would make me happy, either, but that's obviously not the only alternative to pay based on seniority.

2. Unions negotiate working conditions as well as pay. Paying by productivity in a zero sum way will likely increase the pace of work making everybody's job harder with no overall gain in pay.

I don't see anyone arguing for "paying by productivity in a zero sum way." Pay should be broadly related to actual productivity. In general, the more productive a worker is, the more he should get paid, and the more productive the workforce as a whole is, the more the workforce as a whole should get paid. I see nothing in this that would tend to make everyone's job harder with no overall gain in pay.

Posted by Mixner | February 27, 2008 10:06 PM

As an working airline pilot I feel the need to weigh in.

1. Flying 60 hour a month is not the same as working 60 hours a month. Flight time is block in/block out time- meaning from the time the brake is released at the departure gate to the time the brake is set at the destination. Yesterday I worked from 8 am until 1230 am and was only paid for about 7:45 of flight time.
2. Productivity pay for a pilot is a terrible idea. It was tried at the birth of the industry and we found it incentivised risky behavior by pilots trying to make their goals. Other metrics, such as paying more to safer, less error prone pilots has its own problems. We believe in a single standard of safety. Either you're safe or your not. If a pilot is determined by management to be error prone and thus not as well paid, why should they even be flying in the first place?
3. Before you complain about high pay for senior pilots on big equipment, ask yourself whom you would want commanding an aircraft for a 12-hour transoceanic flight? How do you keep people in a stressful job that means weeks a month away from home unless you pay top dollar to keep them there? Seniority based pay scales help retain the most experienced pilots by giving them a reason to stay.
4. Pilots can and do get some merit raises. Positions within the training department as instructor pilots are paid more. Being a check airman pays more. These are both sought after positions that go to some of our best people and do act as a reward for outstanding proficiency.

The senoirity system may make for a less effecient work force. In aviation an efficient employment system may not make for the safest possible airline. Safety is the number one overriding goal of any pilot group. Seniority had worked out pretty well in this regard.
If you are so hot to change things, fine. Feel free to engineer your own ailine with a new system for pilot employment and retention. Would you feel safe riding it?

Posted by Mike | February 27, 2008 10:58 PM

Of course, actually getting the plane there would be a major factor in efficiency.

More senior people make more money in general. This is for the reasons you listed; experience etc. There is no reason that this has to be connected to a seniority system. A more experienced pilot is simply more valuable than a newer one. This is true in every area of employment. Therefore it would be some dumb-ass management that treated is senior pilots badly under any system.

What the seniority system really does is make the airlines keep mediocre but long term pilot over the really good new guy. The upside is there as long as management has any brains; the downside is not necessarily there.

So thats the other side of the coin. I don't know which side is right, especially in this particular instance.

Posted by Toxic | February 27, 2008 11:07 PM

Q: "How do you measure the productivity of pilots?"

A: By how many seat miles a pilot generates.

What, some enterprising pilot is take his LGA-ORD passengers all the way to MSP to demonstrate just how much value he can offer? Or swap a fellow pilot's 747 for his own MD-80?

Posted by Matt B | February 27, 2008 11:35 PM

How much of the pilot seniority system is a heuristic for safety, and how much is really just arbitrary work rules?

I also think that in general workers deserve a bigger share of the pie. But if that's the goal, are unions leading the way there in 2008? It makes me both angry and sad to see longtime union workers who have become blind to the ridiculousness of the work environments they have negotiated (two men to lower something from a shelf, three men to change a compressor) and turned into diehard opponents of any kind of change. Any wonder their companies and industries are suffering slow, painful deaths?

Megan, we look forward to hearing your ideas on other policy options to recut the pie besides unions. Restricting labor supply, perhaps? Heh heh

Posted by Bud Fox | February 27, 2008 11:57 PM

The general outcome of any monopoly (of capital or labor) is stagnation and rigidity. It's easier to seek rent than to earn a living in a competitive environment. Unfortunately, our crazy labor laws tend to encourage monopolies of labor where unions exist, often with detrimental consequences.

Posted by Robin Goodfellow | February 28, 2008 3:55 AM

One traditional way for workers to obtain a bigger share of the pie is to buy stock in the company.

Posted by Rex | February 28, 2008 6:47 AM

In some jobs productivity is going to be difficult to measure. In an assembly line it only moves as fast as the slowest employee, so how do you value the other employees working in the line? For pilots, what is a metric that measures the good from bad pilots? In these types of jobs it makes some sense to base compensation on a seniority scale, because it's the best metric for performance available.

Posted by JordanT | February 28, 2008 10:37 AM

J:
"How do you measure the productivity of pilots?" By how many seat miles a pilot generates.

What do you mean "generates"? The pilot doesn't go out to the arrival curb of the airport and solicit passengers for his flight. They fly when, where, and what they're told to fly and the airline organization as a whole provides the passengers.

From the airline's perspective, I think you want to incentivize pilots for doing what they're told, not maximizing their individual seat miles. If ranking by seniority makes it more likely that they'll do what they're told, then maybe it's a good idea.

Toxicroach:
See, I don't see the workers and the managements interests as totally irreconcilable. In some aspects they are opposed, but which side of this supposed duality wants the company to tank because it can't compete?
Okay, let's assume it's the responsibility of the workers to take the financial/security hit when the company starts doing badly. When is there a corresponding responsibility for the company to take a financial hit? The short answer: never. The willingness to drive the company into bankruptcy is an irrational response to that basic imbalance.

Seems like the unions propensity to choke the golden goose is a major downside for the workers themselves.

I'll agree that that's the case sometimes. Will you agree that there's plenty of greed on all sides (including the stockholders)?

Bud Fox:
How much of the pilot seniority system is a heuristic for safety, and how much is really just arbitrary work rules?

Probably some of both. How many crashes do you tolerate in the process of finding out the actual answer?

Posted by BP Beckley | February 28, 2008 11:03 AM

I have personally negotiated solutions to this same problem (union seniority consolidation post-merger under the Railway Labor Act (which also governs airlines) numerous times, and at least 3 of the negotiations each involved thousands of employees.

It's not some silly structural rigidity. It's your paycheck, stupid. It's from the 60's, but the Supreme Court case of Nemitz v. Norfolk & Western
http://supreme.justia.com/us/404/37/case.html
shows just how badly the minority group can get screwed.

Now, let's bring the point home:
Let's say The Atlantic Monthly merges with American Prospect. Let's say the seniority arrangements that are reached put Prospect writers on top, and Atlantic writers underneath. Prospect writers then get all the choices of stories to cover, all the front pages of the book, all the cover lines and you can keep going. Atlantic writers get nothing but the dregs that Prospect writers don't deign to do. Wouldn't the Atlantic writers be expected to fight that outcome with everything they had?

Posted by Wendell | February 28, 2008 12:45 PM

"Again, if seniority list integration is still an issue nearly three years after the merger, it was clearly not an obstruction to that merger."

A successfully completed merger ends up with one functioning company. Much of the work in a successful merger happens after the legal paperwork. Many mergers ultimately fail a short time after the filing of the legal paperwork (think HP/Compaq). Having competing seniority lists is evidence that your company has not successfully merged. Other companies will (and in this case are) look at that and realize that they have to deal with that issue before the formal legal nicities of the merger in order to avoid having the problem of not functionally being able to merge.

Posted by Sebastian | February 28, 2008 2:32 PM

"I'm actually not particularly anti-union, and to the extent that I do have problems with unions, it is not because they seek higher wages and benefits for their members. Rather, it is because they introduce serious structural rigidities into the economy."

1. A lack of "structural rigidities" may be a good thing, but it's hardly the only good thing. Unions raise wages and increase employment stability. Those are good not only for workers but for communities as a whole.

2. It would take an enormous increase in union density (and not only in the US) to have the kind of macro effect that Megan seems to envision.

3. The most successful (and most flexible) American airline, Southwest, is unionized. In fact, the company boasts of how unionized it is.

Posted by Robert Levine | February 28, 2008 3:03 PM

Unions raise wages and increase employment stability. Those are good not only for workers but for communities as a whole.

Tell that to central Michigan, which has been suffering a prolonged economic slump for years on its way to bankrupting the employers softly.

Posted by anony-mouse | February 28, 2008 8:11 PM

Re: There is also a major problem of disincentives when everybody gets paid the same wage as a function of how many years they put in.

And in altogether too many non-union businesses there is a problem with pay being based on how well you schmooze and whose butt you kiss. At least seniority is an objective factor.

Posted by JonF | February 28, 2008 9:47 PM