Labor Markets: Airline pilots

This article in the Wall Street Journal predicts an in increase in pilot salaries, a shortage of pilots (because even higher salaries won’t enable pilots to train immediately), higher airline prices, and potentially riskier flights with some airlines.

http://online.wsj.com/article/SB10001424052970203937004578079391643223634.html?mod=WSJ_hp_mostpop_read

This new regulation would be a good one to try modeling using either the competitive labor market model to see the impact on pilot salaries of the two shocks (high retirement rates and new regulation) or a competitive goods market model to see the impact of higher pilot salaries on airline prices.

3 Comments »

  1. atanasse Said,

    November 21, 2012 @ 8:30 pm

    It’s interesting to notice the shortage of pilots. The new requirements will definitely increase the demands for pilots, soo i guess the wages will go up as well? :)

  2. scardapb Said,

    November 23, 2012 @ 11:19 pm

    This is a scary problem. Using the competitve good market model, the price for airplane flights will not really change since airlines are price takers. However, the cost of supplying the flights will continue to rise due to higher gas prices and airlines will have to increase wages for their pilots in order to keep them from working overseas. An increase in the cost of supply with no increase in demand for flights will cause losses of profit for airlines. Some will be forced to shut down, others will probably have to decrease the number of flights.

  3. Tess VS Said,

    November 30, 2012 @ 1:41 am

    After reading this article I am struck by the fact that we have a lack of pilots in the country. It is interesting that they are raising regulations, which seems to make sense but one of the people quoted in the article said that the raise in air time required isn’t helpful- it just leads potential pilots to do jobs like fly banners across beaches. Although I do think that making sure that pilots are trained well and have experience is important, it is also vital to make sure that because of new regulations potential pilots aren’t discouraged from pursing the career. Relating this article to economic concepts we have learned in class, there is a shortage of supply and an increase in demand for pilots. This unique situation may lead to cuts in smaller flights/regional airports.

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