Hefty Southwest Airlines Bonuses Boost Union Wages in U.S.

June 5, 2019, 6:57 PM

Southwest Airlines Co.'s contract with its mechanics union is single-handedly responsible for a boost in union-negotiated wages with lump sums such as bonuses included, the latest biweekly update of Bloomberg Law’s database of wage settlements shows.

The mechanics got a total of $160 million in retroactive pay as a signing bonus in a contract ratified in May. Divided among the 2,700 workers, that comes out to an average one-time bonus payment of $59,260 per worker, said Bloomberg Law legal analyst Robert Combs.

Unions on average negotiated a 3.3% first-year pay increase in contracts in 2019 based on the latest year-to-date figures through June 3, the same level shown in the previous biweekly update. The year-to-date average through June 3, 2018, was a bit lower at 3.1%.

With lump sums factored in, however, the average rose slightly in the most recent two-week period, from 3.7% to 3.8%. This increase was caused by a sizable boost in the average settlement in the nonmanufacturing sector, from 4.2% to 4.5%, which in turn was attributable to the Southwest Airlines agreement, Combs said.

“A one-time payout of almost $60,000 per worker is almost unheard of. It’s certainly the largest that I’ve seen. But that’s what happens when a company’s employees work for seven years without a ratified contract in place. Those missed annual pay raises don’t evaporate, they accumulate,” Combs said.

More Than Lost Time

The signing bonus does more than just make up for lost time.

“Based on the Bureau of Labor Statistics’ estimated typical earnings for this occupation, if this had been treated like a retroactive wage hike, the bonus would have represented an average yearly increase of more than twice the 3% raise that Southwest has traditionally paid their mechanics,” Combs said.

First-year pay increases for manufacturing contracts during the most recent two-week period averaged 2.9%, the same as for the previous biweekly period. The average increase for state and local government contracts was 2.8%, also unchanged.

The weighted average for first-year increases—which shows the effect of larger contracts on the totals by counting the number of people covered—was 3.5% for all sectors, based on the most recent analysis of 378 labor contracts by Bloomberg Law.

To contact the reporter on this story: Louis C. LaBrecque in Washington at llabrecque@bloomberglaw.com

To contact the editors responsible for this story: Phil Kushin at pkushin@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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