Hedrick Smith: Boeing’s power play
01/10/2014 5:24 PM
01/10/2014 5:24 PM
The narrowly approved contract agreement between Boeing and its Washington state workforce was hailed by some as a victory for the canny, hardball brinkmanship of Boeing’s management and the knuckle-under economic pragmatism of the Machinists union.
But the steep cutbacks in retirement and health benefits that tens of thousands of Boeing workers were forced to swallow have far larger implications for middle-class America.
Boeing’s stingy treatment of its highly skilled workforce offers a vivid example of how America’s new economy has created gaping economic inequalities and steadily squeezed the economic life out of the U.S. middle class over the past three decades, even as corporate profits and CEO pay have skyrocketed.
Boeing’s case epitomizes that sharp economic divide. For just as the company was wringing concessions from its workers, its board of directors approved a 50 percent increase in the company’s stock dividend and a $10 billion stock buyback that will richly reward investors and executives who get paid in Boeing shares.
Boeing contends that it is not the first to impose such concessions but that it is merely following the market.
True enough. In 1980, 84 percent of American workers at companies with 100 or more employees received lifetime pensions from their companies, and 70 percent got health insurance fully paid for by their employers. Today, fewer than 30 percent have lifetime pensions and only 18 percent have fully employer-paid health insurance.
What these numbers mean is that every year hundreds of billions of dollars in benefit costs have been shifted from company books to the pocketbooks and checkbooks of average Americans, helping to boost corporate profits and to leave roughly half of the baby boom generation facing near poverty in retirement.
Boeing’s new contract will accelerate that trend. And it’s not as if hard economic times forced Boeing to slash labor costs. Its profits and demand for its planes are at record levels.
Over the past decade, Boeing rolled up more than $35 billion in profits and paid no federal corporate taxes. In fact, Boeing reaped about $2 billion in federal tax rebates from 2003 to 2012, as well as the most generous long-term state tax subsidy in U.S. history from Washington state.
Boeing said it had to cut costs to meet “aggressive international competition.” But Boeing’s sole major global competitor is Airbus, based in highly unionized Germany and France, and Airbus puts a premium on maintaining its high-quality workforce and treating its workers generously.
German companies over the past 25 years have raised the pay and benefits of middle-class workers five times faster than U.S. companies. And German corporations have kept high-tech jobs at home, so that today 21 percent of Germany’s workforce is in manufacturing versus 9 percent in the United States. What’s more, the German strategy has rolled up $2 trillion in export surpluses while the U.S. has suffered $6 trillion in trade deficits.
Some Boeing union leaders hope to gain leverage and better terms once the 777X goes into production. But rolling back the clock on the shrinking middle-class share of America’s economic pie has proved virtually impossible lately.
For now, the Boeing formula represents the kind of successful corporate power play that prompted Pope Francis recently to chastise modern capitalism for imposing “the dictatorship of an impersonal economy lacking a truly human purpose.”