When I left American Airlines in 2000, 10% of the workforce took home 50% of the available payroll: pilots. The pilots commanded those rates because of collective bargaining power ("self help"). Most people understand the concept of monopoly (single supplier), but few have heard or understood the term monopsony (single buyer). Either condition is considered by economists to be a market failure, that is, a failure of a market to efficiently allocate scarce resources without the need for public choice mechanisms (government) to do so. The airline industry suffers from both monopoly and monopsony in their labor markets. The monopsonies are the airline companies who hire pilots, and the monopolies are the pilot unions. The law that governs the relationships between the monopsony companies and their monopoly unions is the Railway Labor Act (1926).
The RLA was one of the most comprehensive management/labor relations legislation to be enacted in the US and it is hard to argue with its success in the light of what led up to its creation. After nine years of mostly positive experience with the RLA, Congress determined that many of its provisions would be appropriately applied to the rest of the economy, not just railroads and airlines, and the National Labor Relations Act (1935) was created and applied to all other sectors of the economy except government. Railroads and airlines continue to be governed by the RLA.
By 1947 the lessons learned under the NLRA led to an amendment known as the Taft-Hartley Act (THA) that addressed labor-management relations in more specific terms than the original Act. One of the lessons learned under the NLRA was that it was counterproductive to the economy to allow management to engage in collective bargaining, i.e., to form management unions. As agents for the owners, especially when those owners are members of the public who buy shares in those companies, a natural and potentially devastating conflict of interest arises if management are given collective bargaining power. So the THA bars management ("supervisors") from the practice. Legal tests have been developed by decades of case law to define "supervisor".
This feature of the THA has never been applied to the RLA, and that is why it is only in the airlines that senior officers of the company (vice presidents of flight) are allowed by law to engage in collective bargaining. It is a power concentration that is not seen in any other sector of the economy and it is the exercise of that power over many decades in some companies that has resulted in the extraordinary distortion of income distribution mentioned at the top of this post.
We must remember that pilots are rational economic agents and that they are merely exercising their collective bargaining power as any rational player would if legally given the opportunity. So while I have always believed that the RLA is in need of amendment to correct this deficiency, I have never laid blame nor criticized the pilot unions for behaving as we would all behave if given the chance. The law is broken, not the unions and their members.
