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The Department of Justice announced recently that it, along with the Attorneys General of New York, Massachusetts, and Washington, D.C., will move to block the proposed merger between JetBlue and Spirit Airlines, on the grounds that further consolidation of the airline industry will only hurt flyers. This is particularly true since Spirit, which is what’s known as an “ultra-low-cost carrier,” tends to drive down prices on the routes that it flies, many of which overlap with JetBlue’s current routes.
However, not all government antitrust enforcers were so moved. Florida Attorney General Ashley Moody announced on the same day that her office would not attempt to block the merger. Instead, she said that she would support it with certain conditions, including that the new JetBlue-Spirit expand of flights out of Florida airports and agree to particular job creation levels.
However, this is going to turn into a raw deal for Florida. In fact, twice in recent weeks, regulators and enforcers have promoted consolidation in the transportation industry at least partly on job creation grounds, when the long history of mergers—and the trends in those particular industries—has been one of job destruction.
Moody is touting that JetBlue-Spirit has pledged 2,000 new jobs in Florida. The problem is that Spirit, pre-merger, was already planning a new HQ there. So we don’t have a proper baseline to deduce if those jobs would truly be new or if they would have happened anyway due to Spirit’s already planned expansion. The same is true of the flight numbers Moody demanded; Spirit was already planning to increase service in Florida, so it’s possible Moody traded her support for little or nothing.
The same sort of justification was used by the Surface Transportation Board in its decision last week to allow the Canadian Pacific and Kansas Southern railroads to merge, bringing the total number of Class I railroads in the U.S. from seven down to six, which is down from more than 60 in the 1970s. In its decision, the STB pointed to assertions by the merging railroads that they will create jobs on the new mega-line they’ll form, even as they noted that some positions at the railroads as they exist now will likely no longer exist.
In neither case, though, are those job creation promises ironclad. While Florida AG Moody laid out explicit penalties for JetBlue-Spirit missing its flight capacity promises, she has no such penalties on the job creation side. The STB just seemed to take the railroads word for it that new jobs will be created, all bunched under a vague monitoring agreement.
The history here, though, is clear: mergers kill jobs. Indeed, that’s often the point, bundled up in claims that mergers make corporations more “efficient.” One of those efficiencies is that two work streams being done under the separate entities can now be combined into one under the merged entity, which requires fewer workers.
In October 2020, Goldman Sachs’ John Waldron admitted in a speech that an expected American merger wave would harm workers, on exactly these grounds: “Politicians are going to be faced with the uncomfortable reality that you’re going to have more big business doing better and that there’s going to be more losses of jobs along the way.” As Diana Moss of the American Antitrust Institute has said, “Realizing cost savings means fewer jobs.”
Indeed, while there’s no comprehensive dataset, there are plenty of examples of layoffs following mergers. You can read through a bunch of them here, in banking, defense contracting, and pharmaceuticals.
One recent example was the combination of the telecom corporations T-Mobile and Sprint in 2020. T-Mobile claimed that post-merger, the new company would create 11,000 new jobs. Instead, it’s down several thousand. In another example, AT&T cut tens of thousands of jobs after it acquired Time Warner. In the railroad industry, consolidation has coincided with massive job loss, with more than half a million railroad jobs in 1980 becoming fewer than 150,000 today.
Academic work, too, shows that over the long haul, mergers kill jobs and push down wages, the latter of which is to be expected as industries consolidate: fewer employers means fewer opportunities for workers to leave their current firms for higher-paying jobs elsewhere, along with increased opportunities for soft wage-fixing.
The two transportation mergers detailed above will also have negative effects on communities, from raising costs on the airline side to traffic and infrastructure strain on the railroad side. But we should also be super skeptical that any of these effects will be ameliorated by job growth, despite the claims of those in government who are in favor of allowing the mergers to go through.
America’s recent experience suggests the exact opposite will happen: jobs will be lost and won’t be coming back.
This post initially appeared in a slightly different form on the author’s Substack, Boondoggle, on March 23, 2023.
Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle Newsletter, and the director of state and local policy at the American Economic Liberties Project.