Airlines have somehow conned the President, the Speaker of the House and myriad members of the House of Representatives and the Senate to sign onto the idea of a $25 billion ‘clean extension’ of CARES Act payroll support. That’s a second $25 billion injection of cash in exchange for not furloughing workers or eliminating service to most cities through March 31, 2021.
Except that the math here is truly insane. No one seems to be doing the math.
$1 Million Or More Annual Run Rate Per Job Saved
Furloughs from the largest airlines when payroll support expires are expected to total less than 40,000 workers.
- American Airlines say they will furlough 19,000 workers at the beginning of October
- United says they’ll furlough about 17,000
- Delta is going to furlough about 1700 pilots
Southwest isn’t furloughing anyone this year. But let’s round up and say that 50,000 U.S. commercial airline jobs are at risk. That’s half a million dollars per job saved for six months, an annualized run rate of $1 million per airline job. (At fewer than 50,000 jobs ‘saved’ for six months, the per-employee price tag is even higher.)
If you disagree, tell me why I’m wrong. Do the math and show your work!
There are employees on voluntary leave, too, but a clean extension of payroll support wouldn’t require airlines to pay them their salaries. And if their jobs are in jeopardy later, it makes no sense to pay airlines now while they’re on leave, only requiring airlines to keep them until March 31.
Airlines Pocket Most Of The Money
The first round of payroll support covered three quarters of equivalent 2019 airline payroll. Airlines aren’t laying off three quarters of their staff without new payroll support. And airlines have reduced their payroll expenses substantially.
There are plenty of other workers that have taken early retirement. Airlines have axed non-union employees already (giving them modest severance to make their departures voluntary, having told them if they stay through the end of September they get next to nothing). American says their management job cuts save them $500 million a year.
Payroll support mostly covers payroll expenses that airlines are going to incur anyway. It’s effectively a straight cash subsidy into their coffers, benefiting airline stockholders and creditors. This comes after already authorizing $50 billion to the country’s airlines earlier in the year – which airlines abused.
Let’s consider Southwest Airlines, which isn’t furloughing anybody. A clean extension of CARES Act payroll support pays them $4.5 billion not to furlough anybody.
Furthermore, while the original CARES Act didn’t allow airlines to furlough workers or reduce their rates of pay, airlines figured out they could reduce hours to pay workers less and even requiring unpaid leaves. A ‘clean extension’ means signing onto those same shenanigans again, not even fixing some of the obvious flaws.
If You Really Want To Help Airline Workers
If airline workers facing furlough (and in many cases, receiving some furlough pay) are indeed special, and deserving of more support than workers being laid off in other industries, you don’t need to give $25 billion to the airlines in order to help them.
Airlines say they are going to be smaller for awhile, projecting until 2024 before travel demand fully recovers. They have fewer passengers, will run fewer flights, and so they need fewer workers. Covering payroll and limiting furloughs until March 31, 2021 does very little except gets the airlines to pay unemployment instead of the government directly, while using workers as cover for major subsidies to the airlines themselves.
If airlines really are going to be smaller for awhile, then it’s cruel to keep telling people they’ve got jobs when they won’t. Give them a decent transition benefit and help them find their next career.
- Instead of $25 billion to the airlines, take $2.5 billion and give each of 50,000 employees at risk of furlough $50,000 cash right now, up front.
- And like forgiven SBA Payroll Protection loans, call it “not income” so it isn’t taxed.
If you need to offer another transition benefit later, you’ve still got $22.5 billion you didn’t spend having taxpayers subsidize airline shareholders and creditors.
Of course you’d still need to justify helping 50,000 airline workers versus everyone else. $25 billion the airlines want covers $600 a week in pandemic unemployment for 10 weeks for over 4 million workers. $2.5 billion covers it for over 400,000 workers.
But Isn’t This Important For The Economy?
The short answer is “no.” While airlines move people and goods, and that matters, it only matters when there’s demand. Airlines are saying that they won’t be ‘ready’ to respond when the economy is ready to recover if they don’t get a second round of subsidies, but that just isn’t the case.
- Airlines are keeping more pilots on the payroll than they need to fly current routes, because it takes time to train pilots and to keep them current. Airlines are telling you they aren’t behaving in their own best interest, to capitalize on business once it’s there, but their actions say otherwise.
- Flight attendants take mere weeks to train, and even in a strong economy plenty of candidates were available. Before the pandemic American Airlines said it was statistically harder to become one of their flight attendants than get into Harvard. Meanwhile furloughed workers can be recalled.
- Management talent has already been let go. Payroll support doesn’t reverse that.
What’s good for the economy is the opposite of payroll support, keeping people connected to jobs by paying them not to work for the next six months.
The economy doesn’t benefit from workers sitting on the sidelines. Economic recovery comes when everyone is being productive, and that means people moving into their next roles as quickly as possible. For that, a smaller program that assists workers is what would make sense.
The only reason payroll support has a chance of passage is the political calculus not the economic calculus. The President doesn’t want to see jobs lost a month before the election, and Democrats in Congress want to protect union jobs. This isn’t about the economy, it’s about craven electoral calculation.