Boeing Result: Everyone Wins

In a rare vote in favor of common sense and local jobs, Boeing machinists Approve Contract securing 777X jet manufacture in Washington state.

Boeing's machinists on Friday narrowly approved a crucial labor contract that secured thousands of jobs and billions of dollars of economic activity for Washington state but will cost workers their pensions.

The vote of 51 percent to 49 percent to accept the deal means Boeing Co will build its new 777X jetliner and wings in the Seattle area, where Boeing has built aircraft for more than 90 years.

Had the workers rejected the offer, Boeing would have considered making the successor to its popular 777 widebody jet elsewhere, and had received offers from 22 states interested in hosting the new factory.

Common Sense Vote

Boeing secured a no-strike agreement that lasts until 2024. As part of the plan, workers will shift from defined benefit plans to defined contribution (IRA-type) pension plans.

Those are huge union concessions. But the all important counterbalancing force is people keep their jobs. 10,000 or so jobs stay in the region.

Simply put, this was the best possible result for Boeing workers in the Seattle area.

Shocking Result

The result is unusual in that unions seldom do what is best for workers. It is even more unusual because local union leadership was staunchly against the agreement.

This was a rare case in which Contract Debate Divides Union Leadership

On a local union poster were the words ...

“We need every member to stand with us in solidarity, and just say no to this takeaway offer. We are under a great deal of pressure to give up our pension, pay dramatically more in healthcare costs, and stagnate wage growth so we have less take-home pay going forward. We are asked to accept less when Boeing has record profits, record backlogs and approved a $10 billion stock buy back. Machinists stand ready to build the 777X. We are the key to a successful 777X future. Rejecting this concessionary offer, does not diminish all the advantages of building the plane here. Our current wages and benefits are less than 5 percent of airplane costs without these concessions. Vote no and tell Boeing to focus on building the 777X here because analysts, customers and shareholders agree — that is the right choice!”

The difference in opinion between local and national leaders is unusual, but it likely arose because the national union is more concerned with keeping dues-paying members than it is evaluating the contract’s terms, as experts in union politics have indicated. “The theory that this is a way to preserve IAM jobs (and therefore membership) of IAM’s largest District certainly seems plausible, as Leeham Co. aviation analyst told Bloomberg via email. “I certainly can’t think of another reason, and I’m sure International is hardly altruistic.”

Heads, Not Hearts

Union workers voted with their heads, not their hearts, in approving the deal.

10,000 immediate jobs would have been lost had they not done so. Countless other local jobs (restaurants, hotel, limo, etc) jobs would been lost in the process.

Of course, Seattle's loss would have been some other region's gain. In the grand scheme of things it seems to even out. But it doesn't. There are huge moving costs and huge disruptions on local economies.

Win-Win

All things considered, this vote was a huge win for Boeing as well as the local employees. Congratulations to the union for ignoring tremendous pressure from local union leadership.

That said, the local "scorched earth" plan of opposition was so horrendous, one might wonder why the vote was close at all. Had the jobs left Washington state, none of them would have been union jobs.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com