Impoverished Pilots: An Inward Shift of the Demand Curve

Jeff Bailey describes why airline pilots cannot pull down $300,000 a year:

Among the jobs little boys dream of — policeman, fireman, bulldozer driver — airline pilot long held the added virtue of satisfying grown-up dreams: pay that reached $300,000 a year, 20 days a month off work, the prestige of one day commanding a $200 million airplane, and a lush retirement at 60. But the airline industry’s financial collapse this decade did away with much of that, leaving thousands of young men — and increasingly women — chasing a dream toward a disappointing reality … He hopes, of course, to jump ultimately to the big jets at Northwest Airlines, where the most senior pilots can still make more than $150,000 a year, but there is no guarantee he will get there. And, with the airline industry ready to go into another swoon because of high fuel prices, Mr. Captain and other junior pilots could find themselves furloughed … After Sept. 11, 2001, the biggest domestic airlines reduced their fleets by hundreds of planes, so they needed fewer pilots. And through actual and threatened bankruptcies, airlines managed to cut pilot pay by 30 percent or more. Many pilots lost big parts of their pensions. Work hours increased. Certainly, top pay of $200,000 a year at the biggest airlines, down from $300,000, is still a nice living.

OK, airline pilots are not living in poverty but give a little credit to Mr. Bailey for noting how an inward shift in the demand for labor lowers wages. Oh – wait, I spoke too soon:

Poor pay and fewer big-airline jobs to move up to have led to fewer applicants, creating a pilot shortage that is most acute overseas but is also felt here.

Dean Baker objects to this sentence thusly:

if there’s a shortage, then prices fall. Or at least that’s what the NYT tells us about pilot’s wages. To be exact, it tells readers that “poor pay and fewer big-airline jobs to move up to have led to fewer applicants, creating a pilot shortage.” It looks like the basic story is that one of the places the airlines are looking to cut back is on pilots’ pay. At lower wages, few people want the job. That’s not quite a shortage in the normal sense of the term.

Shortages generally drive prices up. What seems to be going on here, however, is the typical movement along a supply curve when the demand curve shifts inward.