The narrowly approved contract agreement between Boeing and its Washington state workforce will be hailed by some as a victory for the canny, hardball brinkmanship of Boeing's management and the knuckle-under economic pragmatism of the International 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 last 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.
For President Barack Obama and others who advocate a fairer, faster-growing economy, it is instructive to understand how Boeing put the screws to its 56,000 workers around Seattle and Everett, Wash.
In a take-it-or-lose-your-jobs ultimatum last November, Boeing declared that if its current workforce wanted to build the next generation of 777X airliners, it would have to agree to about $1 billion of cuts in previously promised pay increases for younger workers, to sharp increases in employee contributions to health care, and to a massive restructuring of Boeing's retirement plans. Boeing said it was freezing its pension plan, shifting tens of thousands of machinists into a far less generous 401(k)-type plan, and would then steadily reduce company contributions, year after year.
When that formula was put to a vote in November, the company's 31,000 rank-and-file machinists rejected Boeing's terms by a vote of 2 to 1. Boeing was ready, perhaps even eager, for that outcome, and despite Washington state's offer of $8.7 billion in tax concessions, Boeing invited other states to bid on hosting the 777X production.
By Christmas, Boeing had lured 22 states into a massive job auction, ready to reward the lowest bidder -#8212; the state offering the lowest tax rate, lowest worker benefits and wages and lowest cost to Boeing (i.e., largest state subsidy) to finance the $10-billion cost of new aircraft plants.