Raising the Bar

Ensuring That Airport Expansion Lifts All of Philadelphia

November 2012

Raising the Bar Ensuring That Airport Expansion Lifts All of Philadelphia
Executive Summary
Philadelphia is the poorest major city in the country. Thousands of Philadelphias working poor work at one of the citys economic powerhouses, the Philadelphia International Airport. Yet the low-bid contracting system for airline subcontractors keeps workers in poverty and deprives the city of badly needed economic benefits. Without a minimum wage and benefits policy in place for airline subcontracted workers at Philadelphia International Airport, thousands of workers compensation is at the whim of their employers, who are not required to pay more than the federal minimum wage. This paper highlights the impact on workers and taxpayers of applying the 21 Century Minimum Wage and Benefits Standard and providing access to decent, affordable health care to airline subcontracted st employees at the airport. Applying the 21 Century Minimum Wage and Benefits Standard could, in addition to lifting workers out of poverty, save taxpayers money by reducing workers dependence on public assistance and could result in covered workers paying as much as $1 million in additional state and city taxes per year. It would also result in the creation of more than 165 jobs a year in Pennsylvania and put an additional $5.7 million a year in the pockets of residents of the Commonwealth. Moreover, the cost of providing workers with increased wages and benefits is so low that it represents less than 1 percent of the revenues that major domestic airlines generate through their operations at the Philadelphia International Airport. And even if the cost is passed on to passengers, it would only increase the cost of a ticket by approximately $1.25, far less than the average fee for checking a bag. In 2000, the San Francisco Airport initiated a minimum wage and benefits program, which cost airlines less than 1% of 1 their revenue, and reduced turnover by an average of 34%. Raising the standards for subcontracted airline passenger service workers at Philadelphia International Airport will benefit all airport stakeholders and improve the lives of all Philadelphians. In this paper, we compare the 21 Century Minimum Wage and Benefits Standard to the current standards in place: the federal minimum hourly wage, without mandated access to health care or paid sick leave. Through conversations with airport workers, we have seen that many workers compensation 2 is the bare minimum required by law: they are paid the federal minimum hourly wage of $7.25 , without 3 access to affordable health benefits or paid sick leave. While some workers report wages above the federal minimum, no airline sub-contracted worker that we have encountered has reported wages st anywhere close to the $10.88 minimum required by the 21 Century law. While the analysis presented in this paper is based on conversations with a relatively small sample of workers, it will be followed up by a more extensive, field survey-based report, with a large sample size, set to be released in the spring.
st st

Reich, Michael, et al, Living Wages and Economic Performance, March 2003. Institute of Industrial Relations, University of California Berkeley , page 9 and 10. 2 Some workers are additionally classified as tipped employees and therefore paid below $7.25. 3 Statements and pay stubs of fourteen workers performing wheelchair, skycap, and baggage job functions for PrimeFlight and Aviation Safeguards.

Low Wage Work in Philadelphia

With over 28 percent of the citys residents falling below the poverty line, Philadelphia is the poorest major 4 city in the country, with poverty rates well above the rest of the countrys top 10 cities. According to the Bureau of Labor Statistics, Philadelphias unemployment rate was 10.9% as of June 2012, well above the 5 national average of 8.4%. For those residents who can find work, low-paying jobs without meaningful benefits dominate the labor market, preventing even working Philadelphians from rising out of poverty. According to data gathered in the 2010 American Community Survey, fourteen percent of poor 6 Philadelphians are employed, and twenty five percent of working Philadelphians either do not have 7 health insurance or rely on government-provided health insurance. This paper examines the situation of workers at the Philadelphia International Airport, which is one of the citys economic powerhouses and is also where thousands of Philadelphias working poor spend their days working. The Philadelphia airport is a major economic engine for the region, generating more than $14.4 billion in 8 spending for the regional economy and supporting over 141,000 jobs. The airport, which handles more 9 than 30 million passengers a year has benefited from over $1 billion in improvements since 2000 , and is currently set to undergo a 13-year long expansion which the city predicts will cost over $6 billion in public 10 11 funds. And while the city expects that this project will create thousands of jobs , many workers at the airport are not benefitting from the massive public expenditures that have and will be made. While job creation is clearly an important goal, the nature of the jobs created is equally important. The City of Philadelphia does not need more minimum wage jobs with no benefits that leave people working full-time but still dependent on public assistance. It needs family-sustaining jobs for local residents. The current low- bid contracting system that dominates the way passenger services are provided in the airport has resulted in a workforce that is unable to escape poverty through full-time work. Of the 12 thousands of workers at the airport, an estimated 2,000 work for airline subcontractors. These men and women perform services including wheelchair assistance for elderly and disabled passengers, skycap services, baggage handling, and cabin cleaning. While subcontracted airport workers do not currently benefit from it, there is a law that makes this reality st possible for other workers in Philadelphia. Philadelphias 21 Century Minimum Wage and Benefits Standard requires by law that workers hired by the city or by companies with direct city contracts make 150% of federal minimum wage (or $10.88), receive paid sick time, and be offered health benefits if any 13 other employees of the company receive them. While this law requires that some of Philadelphias workers are paid a living wage, no such floor is in place for subcontracted airline passenger service workers at Philadelphia International Airport. There is nothing preventing employers from paying workers minimum wage, without access to paid time off or affordable health insurance. Given this low-bid contracting system, it is not surprising that based on conversations with workers, many report earning a 14 minimum wage of $7.25 an hour and receive no meaningful health benefits or paid time off. Some
4

ACS 2011, Percentage of people in poverty for 10 largest cities by population, New York, NY (20.9%), Los Angeles, CA (22.6%), Chicago, IL (23.7%), Houston, TX (23.8%), Philadelphia, PA (28.4%), Phoenix, AZ (22.9%), San Antonio, TX (19.9%), San Diego, CA (16%), Dallas, TX (25.3%), and San Jose, CA (12.2%). 5 United States Department of Labor, Bureau of Labor Statistics, Unemployment in the Philadelphia Area by County June 2012 http://www.bls.gov/ro3/urphl.htm, accessed October 31, 2012. 6 Based on employment status of individuals at or below the federal poverty threshold, ACS 2010, accessed through http://sda.usa.ipums.org/cgi-bin/sdaweb/hsda?harcsda+2010 7 ACS 2010. 8 http://www.phl.org/AboutPHL/Pages/Overview.aspx, accessed October 24, 2012. 9 Ibid. 10 Nutter, US Airways Chief Meet Over Fifty-Runway Dispute, The Philadelphia Inquirer, March 25, 2012. 11 City Picks Managers for Massive Philadelphia International Airport Expansion, The Philadelphia Inquirer, May 31, 2012. 12 Philadelphia International Airport Badging Data, July 2012. 13 Philadelphia Code 17-1305 14 Worker surveys.

workers, such as wheelchair attendants and skycaps are paid as tipped employees, and report earning 15 less than $7.25 an hour. And while some workers report earning above the federal minimum wage, no st workers report earning close to $10.88 an hour as is required under Philadelphias 21 Century Living 16 Wage Law. This paper highlights the impact on workers and taxpayers of applying the 21 Century Minimum Wage and Benefits Standard and providing access to decent, affordable health care to airline subcontracted employees at the airport. In addition to lifting workers out of poverty, it could save taxpayers money in Pennsylvania by reducing workers dependence on public assistance and could result in covered workers paying as much as $1 million in additional state and city taxes per year. It could also result in the creation of more than 165 jobs a year in Pennsylvania and put an additional $5.7 million a year in the pockets of residents of the Commonwealth. Moreover, the cost of providing workers with increased wages and benefits is so low that it represents less than 1 percent of the revenues that major domestic airlines generate through their operations at the Philadelphia International Airport. And even if the cost is passed on to passengers, it would only increase the cost of a ticket by approximately $1.25, far less than the average fee for checking a bag.
st

Substandard Wages and Benefits Result in Costs to Taxpayers

Service workers employed by companies contracted by the airlines at Philadelphia International Airport are barely scraping by. Without a living wage and benefits policy in place, employers can pay as low as the federal minimum wage of $7.25, or even less than that for workers that employers classify as tipped workers. There is no employer requirement to provide access to affordable health insurance or paid time off. Based on conversations with workers, many workers report being paid $7.25 an hour, or less if they are tipped employees. A full-time worker earning the minimum wage of $7.25 would earn $15,080 a year 17 more than 34% less than the federal poverty threshold for a family of four. Workers also report that they lack access to affordable health insurance and paid time off and therefore rely on food stamps and publicly funded healthcare to make ends meet. Many workers that are paid poverty wages without access to health benefits oftentimes rely on public assistance such as food stamps and public health insurance in order to satisfy their basic needs. This results in a cost that all of us bear, as taxpayers, to pay for workers basic needs. A study conducted by researchers at New York Universitys Women of Color Policy Network of airline subcontracted service workers at Port Authority of New York and New Jersey airports working the same types of jobs as those at Philadelphia International Airport found that as much as fifteen percent of workers rely on government 18 sponsored health insurance, and as much as seventeen percent receive government sponsored food 19 subsidies or food stamps. If even a fraction of workers in similar jobs at Philadelphia International Airport are using public assistance, it could mean big costs for taxpayers.

15

PrimeFlight Wheelchair Assistants report earning between $5.25 and $6.75 per hour plus tips; PrimeFlight Wheelchair Coordinators and Baggage Handlers report earning $7.25 per hour; a PrimeFlight Skycap reports earning $2.83 per hour plus tips; Aviation Safeguards Wheelchair Assistants report earning $7.25 per hour plus tips; Aviation Safeguard Security Officers report earning between $8.00 and $9.00 per hour; McGinn Security workers report earning $9.00 per hour; a Prospect cabin cleaner reports earning between $7.50 and $8.00 per hour. 16 Philadelphia Code 17-1303 (1) 17 U.S. Department of Commerce, U.S. Census Bureau Poverty thresholds (2011). 18 Mason, Nicole, Women of Color Policy Network, Above Board: Raising the Standards for Passenger Service Workers at the Nations Busiest Airports, Released February 2012, page 15. 19 Ibid, page 15, Figure 7.

Juan Lantigua, Aviation Safeguards Security Officer I have worked at Aviation Safeguards for 8 years. I work hard to keep passengers safe, but Im barely getting by. I make $8 per hour and get no benefits. The company health insurance is too expensive, so my family has no other choice but to rely on public health insurance and food stamps to survive. I need good health benefits because Im diabetic. I was recently in the hospital and have thousands of dollars in bills that I cant pay. If my health issues arent managed Im at risk of dying and my wife and daughter will be on the street.

Raising Wage and Benefit Standards Means Increased State and Local Tax Revenues
In addition to being able to support themselves and their families, workers who are paid fair wages and benefits are able to contribute to state and local economies as taxpayers. For example, if airline subcontracted service workers were subject to the provisions of the Philadelphia st 21 Century Minimum Wage and Benefits Standard, and thus paid a living wage of 150% of the Federal Minimum Wage or $10.88 an hour, were given 56 hours of paid sick time per year, and received the same 20 supplemental benefits afforded to workers under the Service Contract Act , they would be able to pay an estimated $1 million more in additional state and local taxes. The extra taxes going to the state and city general funds could pay for 19 additional teachers in Pennsylvania schools, or 16 more firefighters 21 protecting our neighborhoods. As of July 2012, there were approximately 2,000 airline subcontracted service workers employed by contractors at Philadelphia International Airport. Assuming a 40 hour work week, the additional wages, paid leave, and health benefits would result in an estimated additional $30.5 million in income for these airport service workers. Brahim Alexander, PrimeFlight Skycap I have worked for PrimeFlight for over a year in various positions. Im currently a skycap making $2.83 per hour plus tips. Its hard because on a slow day I dont make much and not all the passengers tip us. We have no benefits and no paid sick time. Even though my wife also works, we still have a hard time getting by. We find ourselves in a hole at the end of every month and must make hard choices about choosing between paying rent, daycare for our daughter, and other bills. If I made more money we would be in a much better place. We could cover our bills and save some money for the future so we could give our daughter a better life."
20

While the 21st Century Minimum Wage and Benefits Standard does not require the provision of health benefits in all circumstances, we are including it in our estimates. Calculations are based on employers making contributions to a Health and Welfare plan equivalent to the minimum amount required under the Service Contract Act for federal contracts. The supplemental health and welfare benefits amount used is $3.71 per hour. This rate is based on the Service Contract Act prevailing rates determination by the Federal Department of Labor for Philadelphia County for all classifications covered by the general order. Rates accessed at: http://www.wdol.gov/sca.aspx 21 Assuming full amount of Philadelphia Wage Tax and Pennsylvania Personal Income Tax were applied to salaries. Estimated amount of General Fund taxes equals 6.998% (see footnote 22 for individual tax amounts) times $15.1 million in additional wages (see table) or approximately $1 million. Average salaries for teachers ($51,821) and firefighters ($61,236) in Pennsylvania from 2006-2010 American Community Survey.

Additional taxes generated from increased wages Additional wages per worker that would be $22,630.40 - $15,080 = provided to airline subcontracted service workers if $7,550.40 additional, per worker annually they were paid a living wage Additional wages that would be provided to airline subcontracted service workers if they were paid a living wage annually Additional Philadelphia local and PA state taxes on additional earnings paid by workers (Philadelphia Wage tax (resident rate) and PA personal income 22 and SUI/ taxes) Additional income as result of raising standards Median reported wage by airline subcontracted service workers contracted with airlines Value of health benefits provided to service workers contracted with airlines Total cost of wages and health benefits, per worker st Philadelphia 21 Century Minimum Wage (150% of the Federal Minimum Wage) 23 Hourly Benefits Supplement under the SCA Combined value of wages, and health benefits Value of additional annual wages and health benefits per worker that would be provided to airline subcontracted service workers if they were st covered by the 21 Century Minimum Wage and Benefits Standard and offered health benefits Value of additional annual wages and health benefits for all subcontracted service workers if st they were covered by the 21 Century Minimum Wage and Benefits Standard and offered health benefits $7,550.40 per worker annually* 2,000 workers at PHL = $15.1 million additional, annually for PHL airport workers $15.1 million additional annually for PHL workers * 22 7.078% =$1 million additional PA state and Philadelphia local taxes

$7.25/hr = $15,080 annually assuming 40 hours a week (2080 hours a year) $0 $15,080 annually per worker $10.88 an hour = $22,630.40annually (assuming 40 hours week) 2080 hours a year $3.71 an hour benefit supplement = $7,716.80annually $22,630.40 + $7,716.80 = $30,347.20annually per worker $30347.20 - $15,080 = $15,267.20 additional, annually per worker

$15,267.20 additional, annually per worker* 2,000 workers at PHL= $30.5 million additional annually for PHL workers

22

Taxes included in 7.078% figure are the Philadelphia wage tax (using the higher resident rate) at 3.928% (Philadelphia Revenue Department, http://www.phila.gov/revenue/wage_tax.html) , Pennsylvania Personal Income Tax at 3.07% (The Tax Compendium, Pennsylvania Department of Revenue, October 2012, page 20), and the individual Pennsylvania SUI tax at .08% (Pennsylvania Department of Labor and Industry, http://www.portal.state.pa.us/portal/server.pt?open=514&objID=599704&mode=2). PA SUI also has an employer-paid component, but only on the first $8,000 per year of wags for each employee. Since our calculations assume full-time work, the employer contributions are assumed to be already maxed (see Pennsylvania Department of Labor and Industry, http://www.portal.state.pa.us/portal/server.pt? open=514&objID=552154&mode=2). 23 The Philadelphia 21st Century Minimum Wage and Benefits Act requires employers to provide full-time, non-temporary, nonseasonal employees health benefits at least as valuable as the least valuable health benefits that are provided to any other full-time employees. Therefore Health Benefits are not required as part of the 21st Century Minimum Wage and Benefits Act, but are included in our estimates.

Raising Wage and Benefit Standards Means Increased Economic Growth for All Residents of Pennsylvania
Raising the wages and benefits of subcontracted airport workers will not only result in savings to taxpayers and increases in local and state tax revenue. Raising standards for low-wage airport workers means a boost to the larger economy that will increase earnings for workers outside of the airport and create new jobs throughout the region. Imagine if the wages of thousands of airport workers were increased so that they were able to spend more at the local grocery store, buy additional school supplies and clothing for their families, and pay rent on their own. This additional spending would result in additional earnings for other workers, such as people that work at and those who own local businesses. Additionally, as airport workers spend more, shopkeepers are likely to need to hire more workers to run their business effectively and to keep their stores open later. As goods get sold more quickly, they will also need to restock the shelves more often, resulting in increased earnings and additional jobs. Additionally, new small businesses may open to serve new consumption and service needs such as laundries, candy shops, hair salons, and restaurants, creating even more jobs and economic activity. Bigger businesses such as electronic supply stores and grocery stores may also open up as a result of this increased demand for goods. The type of economic growth described above increased earnings and jobs for many workers generated as a result of increased earnings for a specific group of workers is known as a multiplier effect. Economists at the Department of Commerce have created a series of formulas known as multipliers that estimate the increase in earnings and the increase in jobs for all workers in a particular region based on an estimated increase in earnings for a specific group of workers. Using Department of Commerce multipliers, we estimate that raising standards for airline subcontracted service workers at Philadelphia International Airport would result in an additional $5.7 million in annual 24 earnings for Pennsylvania residents. Raising standards for airline subcontracted service workers 25 would also result in the creation of more than 165 new jobs a year in Pennsylvania.

24

Department of Commerce, RIMS II Multipliers (2008/2008); Table 3.5 Total Multipliers for Output, Earnings, Employment, and Value Added by State - Private households (Type II), Earnings/2/(dollars) Type II Private Household multipliers account for direct and indirect impacts, and for induced impacts, which are associated with the purchases made by employees. 25 Department of Commerce, RIMS II Multipliers (2008/2008); Table 3.5 Total Multipliers for Output, Earnings, Employment, and Value Added by State - Private households (Type II) Type II Private Household multipliers account for direct and indirect impacts, and for induced impacts, which are associated with the purchases made by employees.

Earnings Increase for PA 26 Additional wages per worker that would be provided to each airline subcontracted service worker annually if they were paid a living wage Additional wages for all 2000 airline subcontracted service workers annually if they were paid a living wage annually Additional wages that would be provided to all 2000 airline subcontracted service workers if they were paid a living wage annually applied to Department of Commerces Household Earnings 29 Multiplier for PA Job Creation in PA 30 Additional wages per worker that would be provided to each airline subcontracted service worker annually if they were paid a living wage Additional wages that would be provided to all 2000 airline subcontracted service workers if they were paid a living wage annually Additional wages that would be provided to all 2000 airline subcontracted service workers if they were paid a living wage annually applied to Department of Commerces Household 33 Employment Multiplier for PA
32 31 28 27

$22,630.40 - $15,080 = $7,550.40 additional, per worker annually

$7,550.40 per worker annually* 2,000 workers at PHL = $15.1 million additional, annually for PHL airport workers 0.3806 (multiplier) * $15.1 million= $5.7 million additional, annually for all PA residents

$22,630.40 - $15,080 = $7,550.40 additional, per worker annually

$7,550.40 per worker annually* 2,000 workers at PHL = $15.1 million additional, annually for PHL airport workers 10.9927 (Employment Multiplier, the number of jobs per million dollars of additional consumer spending) * 15.1 (millions of additional dollars annually for PA workers) = 165 jobs annually for PA

26

Only wages are used in this calculation - as opposed to wages, health benefits, and sick leave - because the multipliers estimate of economic impact is dependent on workers spending their earnings. Sick leave and health benefits cannot be spent. Pre-tax wages are used for this calculation. 27 Only wages are used in this calculation - as opposed to wages, health benefits, and sick leave - because the multipliers estimate of economic impact is dependent on workers spending their earnings. Sick leave and health benefits cannot be spent. Pre-tax wages are used for this calculation. 28 Only wages are used in this calculation - as opposed to wages, health benefits, and sick leave - because the multipliers estimate of economic impact is dependent on workers spending their earnings. Sick leave and health benefits cannot be spent. Pre-tax wages are used for this calculation. 29 This multiplier represents the total dollar change in earnings of households employed by all industries within the state for each additional dollar of output delivered to final demand by the selected industry. Department of Commerce, RIMS II Multipliers (2008/2008); Table 3.5 Total Multipliers for Output, Earnings, Employment, and Value Added by State - Private households (Type II) 30 This is a conservative estimate. Only wages are used in this calculation - as opposed to wages, health benefits, and sick leave because the multipliers estimate of economic impact is dependent on workers spending their earnings. While sick leave and health benefits cannot technically be spent, these benefits do provide income in the form of money that would otherwise be spent on foregone wages for a lost day or on health care costs. Pre-tax wages are used for this calculation. 31 This is a conservative estimate. Only wages are used in this calculation - as opposed to wages, health benefits, and sick leave because the multipliers estimate of economic impact is dependent on workers spending their earnings. While sick leave and health benefits cannot technically be spent, these benefits do provide income in the form of money that would otherwise be spent on foregone wages for a lost day or on health care costs. Pre-tax wages are used for this calculation. 32 This is a conservative estimate. Only wages are used in this calculation - as opposed to wages, health benefits, and sick leave because the multipliers estimate of economic impact is dependent on workers spending their earnings. While sick leave and health benefits cannot technically be spent, these benefits do provide income in the form of money that would otherwise be spent on foregone wages for a lost day or on health care costs. Pre-tax wages are used for this calculation. 33 This multiplier represents the total dollar change in number of jobs that occurs in all industries within the state for each additional million dollars of output delivered to final demand by the selected industry. Department of Commerce, RIMS II Multipliers (2008/2008); Table 3.5 Total Multipliers for Output, Earnings, Employment, and Value Added by State - Private households (Type II)

Cost Would be Negligible to the Airlines

The cost of raising standards would represent less than 1% of the annual revenue of major domestic carriers at Philadelphia International Airport. For airlines like US Airways, which flies the majority of 34 passengers into and out of PHL and has reported record profits two quarters in a row, the costs of lifting 35 Philadelphians out of poverty is minor. US Airways has produced profits of over $550 million in the previous two quarters, and states that it 36 expects to break records with profits for the fourth quarter of 2012 as well. The companys CEO W. Douglas Parker has been rewarded handsomely for the airlines success, reporting over $3.8 million in 37 compensation for 2011. While Parker credits the companys performance to its 32,000 hard-working 38 employees, he makes more than 250 times as much as one airline subcontracted service worker 39 making minimum wage. Additionally, even if airlines decide to pass these costs on to passengers, the increased cost per passenger would only be $1.25. The combined 2011 annual revenue of all domestic airlines at Philadelphia airports (excluding charter flights) was $6.5 billion. (See attached chart) This figure was derived using 2011 data compiled by the Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics. First, the percentage of 2011 passenger revenue miles, or the number of passengers multiplied by the distance flown, for which Philadelphia International was the origin or destination airport was derived for each of the following airlines: AirTran, Air Wisconsin, American Airways, American Eagle, Continental, Delta, Frontier, Republic, Southwest, United, U.S. Airways, and USA 3000.Then, these percentages were applied to the total 2011 annual revenue figures for each airline. For foreign carriers, The Department of Transportation does not provide any data for annual revenue. In addition, data for charter carriers is not provided for passenger revenue miles or annual revenue. Therefore, the estimate excludes foreign carriers and charter flights. Cost to employers of raising standards Median reported wage by service workers contracted with airlines Value of paid leave provided to service workers contracted with airlines Value of health benefits provided to service workers contracted with airlines Total cost of wages, health benefits, paid leave per worker st Philadelphia 21 Century Minimum Wage (150% of the Federal Minimum Wage) st Value of paid sick leave under 21 Century Minimum Wage and Benefits Act Hourly Benefit Supplement under the SCA

$7.25/hr = $15,080 annually assuming 40 hours a week (2080 hours a year) $0 $0 $15,080 annually per worker $10.88 an hour = $22,630.40annually (assuming 40 hours week) 2080 hours a year $10.88 an hour = $609.28 annually (assuming max allowable of 56 hours a year) $3.71 an hour benefit supplement = $7,716.80annually

34

Based on 2011 passenger data from www.transtats.bts.gov/Data_Elements.aspx, using US Airways and Air Wisconsin (which operates US Airways Express flights in Philadelphia) passengers for whom Philadelphia was the airport of origin or destination, as a percentage of passengers from all carriers for whom Philadelphia was the airport of origin or destination. 35 US Airways posts record 2d quarter profit, The Philadelphia Inquirer, July 25, 2012, and US Airways posts record 3Q profit, The Philadelphia Inquirer, October 24, 2012. 36 Ibid and US Airways Group (LCC) Q3 2012 Earnings Call October 24, 2012 (transcript page 3). 37 US Airways Group Proxy, April 27, 2012, Summary Compensation table, page 54. 38 US Airways Group (LCC) Q3 2012 Earnings Call October 24, 2012 (transcript page 3). 39 Assuming $7.25 hourly wage and full time employment (2080 hours per year).

Combined value of wages, benefits, and paid sick leave, per worker Additional annual wages and paid sick leave per worker that would be provided to all 2000 airline subcontracted service workers if they were provided a living wage and benefits Difference between wages, benefits and paid leave provided to all 2000 airport service workers on contracts with the airlines and the cost of a living wage 40 Payroll taxes on increased amount of wages only 41 (SS, Medicare, Unemployment, PA SUI) Total costs of increased wages, paid leave, health benefits and increased payroll taxes Cost of increased standards for major domestic carriers at PHL as a percentage of PHL-derived revenue

$22,630.40 + $609.28 + $7,716.80= $30,956.48annually per worker $30,958.48 - $15,080 = $15,876.48 additional, annually per worker

$15,876.48 additional, annually per worker* 2,000 workers at PHL= $31.7 million additional annually for PHL workers 7.65% x $15.1 million = $1.2million

$31.7 million + $1.2million = $32.9 million $32.9 million (costs) divided by $6.5 billion revenue)= 0.50 percent (Philadelphia airline

Thus, the total additional cost to major domestic carriers at Philadelphia International to raise standards for 2,000 airport workers would represent less than 1% of the airlines annual revenue at the airport. If the airlines passed the cost of increased wages, health benefits, and paid sick leave on to passengers, the average increase to ticket prices for passengers departing or arriving at Philadelphia would only be $1.25. Nearly all major domestic airlines at Philadelphia International Airport charge fees of up to $25 for a passengers first checked bag. The cost of lifting a large number of hard-working Philadelphians out of 42 poverty would be a fraction of that cost. The potential cost to passengers was derived using 2011 data compiled by the Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation Statistics. Passengers for whom Philadelphia International was the origin or destination airport were included for each of the following airlines: AirTran, Air Wisconsin, American Airways, American Eagle, Continental, Delta, Frontier, Republic, Southwest, United, U.S. Airways, and USA 3000. Foreign carriers and charter flights were excluded for consistency with the prior calculation. Cost of increased standards per passenger for major domestic carriers at PHL $32.9 million (costs) divided by 26,413,907 (passengers) = $1.25 per passenger

40 41

Value of the health plan not included because it is not subject to payroll taxes. 2012 employer contribution for Social Security at 6.2% on earnings up to $110,000 (using 6.2% based on assumption that employees will not earn over $110,000), Social Security Administration, Update 2012; 2012 Medicare employer tax at 1.45% of all earnings, Social Security Administration, Update 2012; Federal Unemployment Tax is calculated on the first $7,000 of wages. Since we are assuming full-time employment, we are also assuming that employer contributions to Federal Unemployment are maxed, Department of Revenue, Internal Revenue Service, Instructions for Form 940, 2011; See supra at footnote 21 for PA SUI tax information. 42 Based on first checked bag fees of AirTran, Alaska, American, Delta, Frontier, United, US Airways, and Virgin America for domestic flights as of April 4, 2012. http://www.airfarewatchdog.com/blog/3801089/airline-baggage-fees-chart-updated/

Conclusion and Recommendations: Raising Standards Benefits All Airport Stakeholders

Raising standards for airport workers not only brings positive change to Philadelphias impoverished communities. Raising standards also benefits passengers, employers, and the City in its role as the 43 airport owner and operator. With the City planning to invest billions of dollars in expanding the Philadelphia International Airport, its economic impact is set to continue to grow, both through direct employment at the airport and by supporting commerce throughout the region. It is only fair that the subcontracted service workers whose hard work enables the airport to function receive their fair share of the benefit. Raising wages and benefits for thousands of airport workers could lift workers out of poverty, save taxpayers money, create jobs, and put additional money in the pockets of residents of the Commonwealth. Moreover, the cost of providing workers with increased wages and benefits is minimal, whether it is paid for by the airlines or passed on to passengers. In 2000, the San Francisco airport initiated a Quality Standards Program, which required workers to be paid at least $9 per hour (increased to $10 per hour in 2002, and indexed to the Bay Area CPI for workers in secure areas or performing security functions). It 44 also included requirements for paid time off and other benefits for certain workers. According to a study conducted by researchers at UC Berkeley, the QSP cost airlines less than 1% of their revenue, and 45 reduced turnover by an average of 34%. Raising the standards for subcontracted airline passenger service workers at Philadelphia International Airport is set to benefit all airport stakeholders and improve the lives of all Philadelphians.

43

Based on documents received from the airport, at least 85% of the $6.5 billion cost of the Capacity Enhancement Program is expected to come from Airport bonds, airport Passenger Facility Charges (including PFC bonds), and parking Customer Facility Charges. Presentation: DOAPAAC Capacity Enhancement Program Discussion Meeting #5: CEP Implementation/Financials (Part B), May 19, 2011, slide 20. 44 Michael Reich et al, page 15 (table). 45 Michael Reich et al, page 9 and 10.

10

Passenger Revenue Miles 2011, the number of passengers and the distance flown in thousands

Revenue in thousands of dollars Annual Operating Revenue $13,340,511 $13,654,641 $35,230,371 $624,022 $23,957,565 $21,155,218 $660,186 $16,174,879 $2,941,625 $1,661,914 $2,200,175 $111,585 Annual Revenue at PHL $4,655,367 $469,087 $300,245 $147,871 $197,451 $230,525 $304,878 $120,003 $61,817 $21,101 $27,766 $10,903 $6,547,012 $6,547,012,483

Domestic Airlines U.S. Airways Southwest Delta Republic American United Air Wisconsin (US Air Express) Continental AirTran Frontier American Eagle USA 3000

PHL Origin 10,528,867 1,440,143 687,327 662,172 516,628 504,407 454,867 298,110 207,175 63,862 57,719 35,324

PHL Destination 10,667,550 1,440,486 711,948 680,279 524,891 561,182 441,551 308,634 210,037 66,920 57,214 35,786

Annual Total 60,740,870 83,852,181 164,189,287 5,665,210 126,371,697 97,788,957 1,941,112 81,781,570 19,853,579 10,300,515 9,107,380 727,744

Percent of Total 34.90% 3.44% 0.85% 23.70% 0.82% 1.09% 46.18% 0.74% 2.10% 1.27% 1.26% 9.77%

From all airports, excludes charter flights and foreign airlines. Additionally missing Chautauqua Airlines.

All data from Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation and Statistics. www.transtats.bts.gov/Data_Elements.aspx

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Passengers 2011, the number of passengers Domestic Airlines U.S. Airways Southwest Delta Republic American United Air Wisconsin (US Air Express) Continental AirTran Frontier American Eagle USA 3000 PHL Origin 6,439,424 1,708,487 782,269 1,389,134 454,620 366,902 1,368,370 224,723 277,952 41,310 85,076 24,540 PHL Destination 6,477,146 1,698,850 802,404 1,430,111 458,293 380,336 1,344,480 225,019 281,718 43,459 84,288 24,996 Annual Total 12,916,570 3,407,337 1,584,673 2,819,245 912,913 747,238 2,712,850 449,742 559,670 84,769 169,364 49,536 26,413,907 From all airports, excludes charter flights and foreign airlines. Additionally missing Chautauqua Airlines.

All data from Department of Transportation, Research and Innovative Technology Administration, Bureau of Transportation and Statistics. www.transtats.bts.gov/Data_Elements.aspx

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