21. Flying Dangerously
All things being equal, workers in more hazardous environments are paid
more money than other workers. From an economist's viewpoint, this wage
differential exists to compensate the workers for the higher risks they face.
Market efficiency is achieved when the wage is set so that workers are
willing to trade their safety for extra money.
Piloting airplanes is a risky job and almost everywhere around the world
civilian pilots earn high incomes. According to some estimates, the total
income of a Vietnam Airlines' Boeing 777 pilot is around VND 40 million
a month. We can use the concept of risk to determine whether the pilot's
extra income is justified.
The probability that an airplane may be lost during a certain period of
time is based on the accident rate per cruise hour. To adjust for increased
risk during takeoff and landing, 3.7 hours of cruising are added for each
flight. Thus, a 1.75-hour flight between Hanoi and Ho Chi Minh City will
be equivalent to 5.45 hours of cruising. Statistical surveys show that on
average one plane is lost per 1,566,000 "equivalent hours."
A Vietnam Airlines Boeing 777 pilot normally flies 227 equivalent hours
in a month. His probability of being killed because his plane is lost in the
course of a month is, therefore, equal to 227/1,566,000 = 0,0145%.
Let's assume that if the pilot worked in a safe environment with the same
degree of technical requirements and stress level as piloting a plane, he
would earn VND20 million per month. Therefore the other VND20 million
of his income is the risk premium for accepting the risk of flying. The value
he puts on his life is 20/0.0145% = VND138,000 million or US$8.8
million.
