Washington Hands Boeing Billions; Union Hands Back Contract

Washington Hands Boeing Billions; Union Hands Back Contract
November 20, 2013

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

After a two-day special session, Washington State lawmakers in November approved approximately $8.7 billion of incentives for The Boeing Company to build the 777X jetliner in the state.

Boeing’s 31,000 members of the International Association of Machinists and Aerospace Workers followed that vote a few days later by rejecting – by a 2-to-1 margin – an eight-year contract offer, putting the future of the 777X in Washington in doubt.

“No one’s sure what’s going to happen now,” said Erin Shannon, director of the small business center at the Washington Policy Center, a free market-oriented public policy organization. “Is it important to keep Boeing here? Certainly. But these incentives are a double-edged sword for us. The fact that we have to give Boeing special breaks to get them to do business here, what does that tell you about our business climate?

“And now with the machinists rejecting Boeing’s contract offer, who knows what will happen?” she said.

Largest Incentive Package on Record

Gov. Jay Inslee was jubilant after lawmakers approved the huge Boeing incentives package, believed to be the largest for one business in U.S. history.

“This is a great day for everyone in Washington,” Inslee said in a statement. “Winning the 777X will secure tens of thousands of jobs and yield huge economic benefits for generations to come. And it will bolster our state’s legacy as the aerospace capital of the world.”

Among other things, according to the governor’s office, the incentives package will

  • Extend all commercial airplane tax incentives until 2040 and expand the current sales and use tax exemption on construction of buildings to manufacture “superefficient airplanes” to include all commercial airplanes and suppliers of wings and fuselages.
  • Expand the state’s investment in education and workforce development to boost enrollment in aerospace fields at community and technical colleges, train workers for manufacturing of composite wings and complete the Central Sound Aerospace Training Facility in Renton.
  • Streamline permitting actions that will speed up development and expansion of facilities at large manufacturing sites around the state.

No More Contract Offers

Boeing officials publicly declared before the vote that this was the company’s last offer. Boeing several years ago moved its corporate headquarters to Chicago, and four years ago opened a production line for its 787 jetliner in non-union South Carolina.

With the union having soundly rejected the offer, it’s possible production of the 777X could leave Washington even with the incentives package as enticement to stay. Boeing officials have said they will announce where they plan to build the jetliner by early 2014.

“It is my belief that we represent the best aerospace workforce in the world and hope that as a result of this vote Boeing will not discard our skills when looking to place the 777X,” said Tom Wroblewski, the union’s directing business representative, in a statement.

“We preserved something sacred by rejecting the Boeing proposal. We’ve held on to our pensions and that’s big. At a time when financial planners are talking about a ‘retirement crisis’ in America, we have preserved a tool that will help our members retire with more comfort and dignity."

Washington Policy Center’s Shannon said, “I don’t know if the machinists are delusional or simply believe Boeing has nowhere else to go. Boeing was clear this was a one-shot deal.”

‘Emotional’ Rather Than Economic

Seattle Times columnist Bruce Ramsey has closely followed the story and wrote of the union members:

“Their friends in the media called Boeing’s terms ‘a race to the bottom.’ It was a silly phrase. There were take-backs, but the top pay ($33 to $43 per hour in various grades) was not cut, and it continued to be protected from inflation — unlike most private-sector pay. Workers would have investment risk on their retirement, but most American workers have had to accept that. Boeing offered to fund the Machinists’ retirement savings with essentially a 10 percent match, and in the first few years even more.

“These are not workers within a light-year of the bottom.

“Their decision to say no to Boeing’s offer cannot be explained by economics. It was emotional.”

Shannon also said there is another reason Boeing might want to move production out of state:

“Earlier this year Boeing said there are two big issues: workers compensation insurance and water quality standards. Washington is contemplating the most restrictive clean water standards in the nation. Boeing’s been very vocal on this. They’re so restrictive they currently cannot be met, and there is no technology to measure those standards or ensure they’re met.

“And workers comp reform played no part in the special session.”

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)