2008 EFF IN THE NEWS

September 25, 2008

Boeing machinists may get more than they bargain for

By Amber Gunn and Sonya Jones

In these economically precarious times, it is difficult to imagine anyone getting a 13 percent raise, but that is exactly what Boeing machinists are demanding—and then some.
 
Tom Wroblewski, president of local District 751 of the International Association of Machinists and Aerospace Workers, asserted that Boeing will pay a price for not offering the union an acceptable contract and averting a strike. “Once you go out on strike, the price goes up,” he said. So much for negotiating.
 
“These members are not going to go out on strike and come back for the same thing that was on the table. The industry rate has been 9 to 13 percent. And we have always been the leaders in the industry,” said Wroblewski.
 
But that’s not all the machinists want. In addition to a pay increase, union members want better pensions and healthcare, and job security. The union wants to dictate to Boeing how many employees it will have and prohibit the company from subcontracting out work that could be done by its members, even if that is not in the best interest of Boeing.
 
These negotiations are happening at a time when nationwide unemployment has reached 6.1 percent and some of the nation’s oldest and most secure companies are going under. More than half a million jobs have been lost in the U.S. since January—and that was before the Lehman disaster.
 
Boeing must act quickly if it is to remain competitive in a global market. John Tillman, CEO of the Illinois Policy Institute, compared Boeing’s plight to that of General Motors, Ford and Chrysler in the 1980s.
 
“Boeing and its workers are at a crucial juncture; they compete in a global arena and whatever agreement they make must reflect that.  If Boeing forgoes outsourcing, their fate will be sealed just as it was for the Big Three automakers.  Back then management and labor—together—made the wrong decisions,” Tillman said.  
 
Boeing’s final offer to the machinists was more than generous by almost any standard, including a 14 percent monthly pension increase, a 2008 lump-sum bonus worth about $3,900 on average, a generous new incentive-pay plan and other perks. All told, Boeing estimated the package was worth an additional $34,000 in extra compensation to the machinists over three years.  
 
What if that increase is not sustainable to Boeing?
 
In 2002, Gulfstream Aerospace pulled its manufacturing operations out of Oklahoma City after union demands became unsustainable, leaving several hundred employees out of work. Those operations were absorbed into other existing manufacturing facilities, allowing Gulfstream to operate more efficiently and increase its profit margin.
 
According to the Mackinac Center for Public Policy, between the years 2001 and 2006, manufacturing employment in right-to-work states declined 1.5 percent annually and 7.1 percent overall. In non-right-to-work states like Washington, manufacturing jobs declined 3 percent annually and 13.7 percent overall. The difference is telling.
 
Washington has already bent over backward to keep Boeing in state. In 2004, the state sealed a $4 billion deal that included tax breaks, road improvements, dock facilities, unemployment insurance reforms, workers’ compensation reforms, a Boeing employee training center and a state-funded Boeing Aerospace Futures Board.
 
Whether the blame for this assault on taxpayers lies with the state’s poor business climate or Boeing’s rent-seeking behavior is debatable.  Given the amount of money and special concessions Boeing has already been given, it is not an indefensible position that Washington taxpayers should also have a place at the bargaining table.
 
This month has seen some of the largest government bailouts of private companies in U.S. history. The machinists’ unreasonable demands are setting Boeing up for a similar fate, should the company concede.
 
Given the machinists’ apparent disregard for economic realities and their totally unsustainable demands on their employer, Boeing would be wise to take its business elsewhere.
 
There is a right way and a wrong way to handle labor negotiations. Companies have a bottom line, and they must respect it.
 
John Tillman points to Peoria-based company Caterpillar as an example of doing things the right way, starting in the 1980s. “Caterpillar went to the mat and achieved labor and manufacturing flexibility in its 1980s labor agreements. It has thrived ever since. Boeing, both management and its workers, should take note.”
 
Companies operating in a marketplace without artificial constraints created by labor unions operate more efficiently. Economies in right-to-work states are growing, while economies in other states are in trouble. The difference is the unions.
 
If Boeing machinists are not careful, they will bargain their jobs right out of existence.

Amber Gunn is Director of EFF’s Economic Policy Center. She serves as a voting member on the American Legislative Exchange Council’s Tax and Fiscal Policy Task Force and is often consulted by media outlets and legislative staff for issue briefs and policy analysis. Prior to joining EFF full time, she was a Charles G. Koch Fellow in partnership with the State Policy Network. Amber holds a B.A. in Political Science and Spanish from the University of Washington.

Sonya Jones is the Director of the Labor Policy Center at EFF. Sonya was formerly a fellow in the College of Public Interest Law at Pacific Legal Foundation where she litigated numerous cases involving the Endangered Species Act. Sonya also worked as staff counsel to the Senate Republican Caucus during the 2008 legislative session in Washington State. She currently serves as the President of the Puget Sound Lawyer’s Chapter of The Federalist Society. She earned her law degree from Texas Tech University School of Law and a bachelor of arts in sociology at Texas Tech University. Sonya is admitted to practice in Washington State courts, the Western District of Washington, and the Ninth Circuit Court of Appeals.

Contact: Sonya Jones

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Director of the Labor Policy Center

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