Trump tax cut gives U.S. workers a hard landing

Albania Bourdier is the person who, if President Donald Trump were a truth-teller, would be a big beneficiary of Trump’s corporate tax cut. The 44-year old gate agent for American Airlines’ Envoy Air commuter-airline subsidiary makes $13.50 an hour at New York’s LaGuardia Airport. She lives with her mother and 12-year old son in a one-bedroom Brooklyn apartment.

This month her union is in mediation with American Airlines Group AAL, +2.65% — which hasn’t given Bourdier a raise in three-and-a-half years she’s worked there, except those mandated by New York’s rising minimum wage. But the airline has bought back $11 billion of its stock since mid-2014, and authorized repurchases totaling $2 billion more by 2020.

It’s in situations like the talks at American’s regional airlines, chiefly Envoy and Piedmont, that we’ll learn what Trump’s tax cuts were really about. Already, we know they were about delivering giant windfalls for rich individuals, a 14 percentage-point cut in the top rate for corporations (that’s a 40% decline) and temporary crumbs for workers. The selling point for the masses was the claim that the corporate tax cut would work itself down to folks like Bourdier as wage gains — beginning, in her case, when Piedmont and the Communications Workers of America (CWA) met with a federal mediator on July 10.

She’s not holding her breath. “I want decent pay,” Bourdier said. “At least, I don’t want to struggle with the rent. I need to have my own place.’’

Is there enough in the tax cut to help people like Bourdier? American has already credited the law for a $1,000 per-worker bonus it paid shortly after the law’s passage, but that’s not much for a company with more than $40 billion in revenue and 126,000 workers (the bonus totaled $126 million). The real test will be whether the tax cut makes an ongoing difference for nonsupervisory workers — whose inflation-adjusted wages are lower now than in 1974.

Look at the facts, and decide for yourself.

American certainly has been making money lately. The airline business is simple when planes are full and fuel is cheap — both of which have been true since 2014. The spot price of fuel is down more than 30%. Planes are flying about 83% full, according to Airlines for America, a trade group — up 20 percentage points from the also-prosperous 1990s.

That’s why American made just under $2 billion in profit last year — which is actually down from 2016, because fuel prices were 20% higher, bouncing off lows for airlines just as for consumers’ cars. American’s stock, buoyed by buybacks, rose from $5.47 in 2013 to $58 and is now around $38. Accordingly, whether American can afford $1.6 billion worth of share buybacks in 2017 is a fair question. American is also investing in new planes, with $6 billion in capital spending in 2017.

The offer they’re making to regional airline employees is not embarrassingly bad. Envoy’s vice president of legal, labor and employment issues, Chris Pappaioanou, says gate agents like Bourdier are being presented with bonuses and raises worth 3% a year for each year of a five-year deal. (The deal is slightly different for markets like New York with higher minimum wages, he added.) Combined with the introduction of a union scale for newly organized workers, bucking up pay for longer-tenured employees who haven’t gotten merit raises, many workers’ take-home will rise substantially.

“It’s a little bit of a false narrative,” he said. “Whoever is saying that [workers are being put behind shareholder interest] isn’t acknowledging the significant amount of money that has been offered [or] the significant contributions of employees to the bottom line.’’

Yet even a 15%-plus raise will leave some gate agents making $10.67 an hour in four years — less than inflation-adjusted minimum wages from the 1970s, when real incomes for nonsupervisory workers like Bourdier peaked.

“We have made some progress at the bargaining table toward fair wages and a good contract but it is not enough and it has taken far too long already,” CWA spokeswoman Zoe Bridges-Curry said in a statement. “We have been bargaining for over two years and the agents have had minimal increases during that time so there’s a lot of ground to make up. Also, there’s a big difference over the long run between base pay and bonus pay and that remains a key issue."

American’s offer isn’t chintzy, but reflects rising fuel prices and the not-small chance of a recession within five years. The company also dialed back share buybacks last year as fuel prices rose. So maybe that’s the bottom line for workers under the Trump tax cut: It’s something — but not enough.


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