Many runway jobs of baggage and cargo handlers and cabin cleaners at Los Angeles International Airport have been outsourced to labor contractors, resulting in reduced wages and benefits for workers. For a small, incremental cost passed along to passengers, meaningful improvement can be made in the standard of living and health benefits of LAX airside workers, which will spark significant sales and tax multiplier effects for the Los Angeles region.

Executive Summary

This report analyzes the individual, community and regional impacts of outsourcing “airside” jobs at Los Angeles International Airport.

Airside jobs include: Cabin Cleaning, Baggage Handling, Ramp Operations and Cargo Services.

We examine whether and to what degree airside (sometimes referred to as ‘below-the-wing’) workers have lower earnings and benefits when employed in outsourced jobs in Support Activities for Air Transportation compared to their peers employed directly in the Scheduled Air Transportation industry in Los Angeles.

We also examine the economic and employment impacts (aka multiplier effects) for the communities where many LAX airside workers live, as well as Los Angeles County as a whole.

Findings

Wages

1. Workers employed directly by airlines earn higher average wages than those employed by “outsourced” airline support services companies, a difference of $10,000 per year.
2. This gap in wages between the two separate industries, both employing airside workers, has existed at least since the mid-1990s, when the average wage gap was even larger.
3. For senior workers in airside occupations who reach the high end of the pay range:
   • Cabin cleaning workers who are outsourced earn almost $7 per hour less than cabin cleaners working directly for the airlines.
   • Baggage handlers earn just over $7 per hour less when outsourced compared to working for the airline companies
   • Ramp operators earn more than $4 per hour less when outsourced.
   • Cargo services workers earn over $10 per hour less when outsourced.

Regional Economic Impacts

• Raising the wages of 5,000 outsourced airside worker wages from an average of $12.07 per hour currently paid to $15.00 per hour would increase total worker income by an estimated $30,503,500 a year.
• Los Angeles County would see a total of $39,443,261 worth of added sales when the indirect and induced multiplier effects of workers’ household spending are included.
• When added wages are spent by airside workers in the communities where most of them live, 54 percent of the economic impacts ($21,241,190 worth of sales) would directly benefit local stores and businesses.
• Raising the health benefits of airside workers to full family plans ($7.55 per hour value) would support a total of $67.97 million of added economic activity, when applied to 5,000 workers. These impacts affect health care providers, their upstream suppliers and local businesses where worker households spend their earnings.

Regional Employment Impacts 

• Measured another way, the household spending associated with raising the wages of 5,000 outsourced airside workers would create a total of 240 person-years of employment.
• If added wages are spent by airside workers in the communities where most of them live, 59 percent of the employment impacts would be concentrated there as well
• Increased health benefits (as described above) for 5,000 workers would support a further 389 person-years of employment, including direct, indirect and induced jobs.

Health Benefits

• The majority of airside workers living near LAX have health insurance of some kind.
• For airside workers lacking insurance, outsourced workers tend to be uninsured more often in all four occupations.
• The most common source of insurance is employer-sponsored policies, although these are also slightly less common for outsourced airside workers; just over a third of outsourced cabin cleaning workers receive health insurance through their jobs.

Work Schedules

• US Census data indicates that outsourced airside workers employed in the Support Activities for Air Transportation industry work the same average hours per week as peers working directly for the airlines.
• Cabin cleaners and baggage handlers include some workers who have part-time schedules, with this job classification as a whole averaging less than 40 hours per week.
• Census data also indicates that ramp operators and cargo services workers average over 40 hours per week.
• Few airside jobs are seasonal, with a majority of workers reporting having worked 50-52 weeks in the previous 12 months.

Job Tenure

• Outsourced airside workers reported 9 times out of 10 that they had been in their current jobs a year or longer.
• Sixty percent have worked their current jobs 3 years or longer. The money to pay for increased wages and benefits would mostly be paid for by travelers passing through LAX from outside the region, and would substantially help Los Angeles’ outsourced airside workers, their families and the communities in which they live

Conclusion

The working conditions, wages and benefits of airside workers employed at Los Angeles International Airport are an important matter for the region. While most of the LAX’s passenger airline customers live elsewhere and are passing through on their journeys, airside workers live and support families here in Los Angeles. For a small, incremental cost passed along to passengers, meaningful improvement can be made in the standard of living and health benefits of LAX airside workers, which will spark significant sales and tax multiplier effects for the communities in which they live, and Los Angeles County as a whole. It is in the interest of public policy makers, the airport and the communities in which airside workers live to bring outsourced workers up to wage and health benefit parity with their peers employed directly in the airline industry, achieving equity below the wing.

_{Photo “LAX” by fujitariuji, posted on flickr with a CC BY-SA 2.0 DEED license.  No changes were made to this image by the Economic Roundtable.}