A labor union’s crash landing

Boeing workers in Washington’s Puget Sound know how to strike. In 1995, when the company was preparing to move jobs out of state, they struck for 69 days and won. Workers whose jobs left the state would be retrained and kept on. To top it off, they got a 10 percent raise.

Facing similar demands in 2005, machinists in Boeing factories walked out for four weeks and secured for themselves retirement payments of about $70 a month for each year worked. When that contract expired in 2008, they walked out again — and returned with a better retirement deal of $83 per year worked.

It may seem odd, then, that the same 30,000 Boeing employees who understood firsthand the power of collective bargaining chose earlier this month to end their pensions plans, which came with guaranteed retirement payments, and accepted in their place riskier 401(k) plans, which guarantee nothing. But circumstances dictated that there wasn’t much else they could do.

Boeing is a company that pits state governments against one another to compete for larger subsidies and forces communities into a race to the bottom to see who can fight unions and lower wages the fastest. It is a prime example of 21st century business in the United States. As a result of these tactics, American workers, both unionized and independent, have little choice but to accept the lowered living standards their employers offer as conditions for their doing business.

This loss of leverage is evident in the story of a factory that Boeing owns in South Carolina. In 2007, before the Washington machinists last went on strike, the company announced plans to expand production, creating thousands of new jobs. After the strike, in 2009, the company took over a subcontractor in North Charleston, S.C. The employees at that plant promptly voted to decertify the union, with the intention of luring the announced project to their town, and the South Carolina state legislature promised Boeing a $900 million subsidy to lure the new jobs from Washington.

Tempted by the cash and a nonunionized workforce, the company announced that it would accept the deal. The relocation would have taken place had Boeing’s management not made the mistake of citing the Washington union’s intransigence as a reason to move jobs out of state — something that, under U.S. labor law, counts as illegal retaliation. The Washington union took its retaliation grievance to the National Labor Relations Board and, as it approached the end of its contract, used it as a bargaining chip in negotiations with the company. It promised to withdraw the complaint if the company kept future projects in Washington and granted a four-year contract extension protecting its hard-won retirement package.

That didn’t work out the way the workers planned.

In November, Boeing announced another new expansion project that concerned the construction of their newest planes, and the Washington State legislature granted the company the largest tax subsidy in the nation’s history to get them to stick around. Then, Boeing approached workers halfway through their contract extension and offered them a deal: Cut your retirement or we won’t make our newest plane in your town; refuse to back down and the taxpayers of Puget Sound can blame you for wasting their $8.7 billion.

The union initially rejected the offer, so Boeing began shopping around for states offering public money. Twenty-two other states — including Missouri, Alabama and South Carolina — piped up eagerly with subsidy packages. State legislatures are so desperate for new jobs that they are willing to lavish subsidies on a company that effectively extorted the state of Washington and 30,000 of its citizens.

This practice has become common. In the last year alone, 13 states granted corporate subsidy packages of over $100 million to companies like Toyota, Yokohama Rubber, Boeing and MetLife. Many of these subsidies are not for job creation but for job relocation — to lure business over to one state at the expense of its friends and neighbors.

The rationale behind these public expenditures are jobs, but the jobs that are created aren’t like those of union machinists’ in Washington, who in 2011 averaged $26 per hour and, until the vote in early January, had defined-benefit pensions. Nor are they on the whole even like nonunion machinists’ in South Carolina, who averaged $18 per hour in the same period and are an exception because of the 477 jets Boeing sold that year for a $4 billion profit. The margins of most companies are significantly smaller than those of Boeing, the second-largest government contractor, which means workers’ wages are often lower too.

After the machinists rejected Boeing’s offer in November, it looked like there might be a strike in 2016, when their contract was set to expire and the same concessions would almost certainly be demanded of them. In the meantime, though, jobs would be lost, and the union might shrink as Boeing auctioned off its work out of state — something the president of the International Association of Machinists and Aerospace Workers, the boss of local District 751’s boss, could not allow. (If there is one thing that matters most to career bureaucrats, it is the survival of their organization.) A revote was ordered, but retirements weren’t up for negotiation. Aerospace machinists were stuck between the company trying to cut their living standards and the union trying to let it.

Twenty-one days after members rejected Boeing’s offer 2 to 1, they flipped, and 51 percent voted to accept it. It is an eight-year contract, and by the time it is over, because of a rising minimum wage, the local leadership claims that entry-level machinists will be making a mandated minimum rather than a union premium.

The story of Boeing is an example of how ruthlessly U.S. businesses use the needs of some workers to justify lowering the standards of others, to the ultimate detriment of both.

In the state of Washington there is little the machinists can do. Since the passage of the National Labor Relations Act, they can’t strike legally until the expiration of their contract. They traded this freedom for government protection on the picket line — an invaluable tool, given the violent history of the American labor movement — but the law as it is applied today puts workers in a bind. By forcing on the union a referendum in the middle of a contract, Boeing and the International Association of Machinists effectively coerced union members to accept the deal. If they said no, they would have had to wait two years, at which point they would have been weaker, potentially with fewer unionized workers in the state. Without risking more radical measures, one of the country’s strongest unions will be unable to continue to protect its members from the effects of capital flight.

Boeing’s strategy is a profitable one. It saves the company money, reduces wages and benefits for workers and ultimately absolves the company of any financial responsibility to take care of its retirees. As a result, production workers, regardless of their state, are left with a smaller slice of a bigger pie. This is, of course, the point: “Now that we have internal competition (among production sites), we’re going to get much better deals,” Boeing CEO Jim McNerney explained in May.  The deals aren’t only on the price of labor, but on the size of subsidies, which states and municipalities must fit into their budgets by either raising taxes or cutting services.

Unless American workers miraculously rediscover collective bargaining or begin to lay claims on the government to promise what organized labor once provided, then their lives will continue to be shaped by companies like Boeing. Their wages will be taken out of their pockets, their tax money out of their schools and roads, and once they retire, they will be left with nothing but a 401(k), waiting for the next stock market crash.