Everett, Wash.
Published: Wednesday, September 10, 2008

Competitive employers create real job security

By Richard S. Davis

 Lousy economic news piles up like fast food trash in a teenager's Toyota. The national unemployment rate climbed to 6.1 percent, 3.4 percent of the state's mortgages are 30 days past due, the feds are taking over the bankrupt mortgage giants Fannie Mae and Freddie Mac, and that near-recession is much more near. Inflation rises. Manufacturing jobs disappear. Anxiety is up. Confidence, down.

And 27,000 Boeing Machinists decide to walk off their jobs. The strike, the fourth in 20 years, resounds with long-term economic consequences for the company and the region.

On the surface, the financial terms of the offer rejected by 80 percent of union members look pretty good. The company offered an 11 percent pay hike, a $2,500 bonus on contract approval and other provisions amounting to an average compensation boost of $34,000 over three years.

But it's not just about the money. Believe it this time. Job security may be more important. Outsourcing, a sore point in the last contract, looms larger this year. Workers are fired up about Boeing's contracting with suppliers for a lot of the work on the 787. And while the compensation offer seems generous in this economy, the union resists "givebacks" like picking up a higher share of health-care costs and limiting death benefits.

Apparently, it's not just conservatives who try "to stand athwart history, yelling, stop," to use William Buckley's line.

In business, "stop" is the command that can never be obeyed. Market economies are nasty and unforgiving, ingenious and dynamic, constantly responding to evolving consumer demands, generating new technologies and production processes as they destroy what went before. This "creative destruction," economist Joseph Schumpeter said half a century ago, is "the essential fact about capitalism." The pace of change has only accelerated in the decades since he wrote. And, if we're lucky, it will accelerate more rapidly in the future.

Job security in this environment will always be elusive. Employers cannot provide workers with guarantees they themselves do not have. Expanding global prosperity, markets and, inevitably, competition has transformed the workplace. While no one would deny the workers who generate profits an appropriate share of current earnings, it's not realistic to make long-term commitments for pension, survivor and health-care benefits. Brisk sales and high profits this year do not assure future success.

We can already see beyond the Boeing-Airbus duopoly. China, now a coveted customer, will eventually emerge as a fierce competitor. Other firms currently nibble at market niches.

Scott Carson, head of Boeing Commercial Airplanes, recently told Washington CEO magazine that high costs make it difficult for businesses in Washington to compete. He added that no one should assume that Boeing or any other company will remain here just because of history.

The industry is changing. Last July, Tom Captain, vice chairman of Deloitte Consulting's aerospace and defense industry practice, told the Aerospace Futures Alliance that airplane manufacturing is becoming a commodity business. Consequently, the costs of production matter more. As technology replaces labor, the manufacturing process becomes more mobile.

While union members and many analysts believe 787 outsourcing has contributed to production delays, it's by no means clear that outsourcing is a flawed strategy. More likely, it's the right approach, if inexpertly executed. International partnerships help sales, stimulate and extend research and development, and build valuable long-term relationships. Union demands for contract provisions that increase costs and reduce flexibility compound the manufacturer's existing challenges.

Clearly, union workers are angry -- 87 percent voted to strike. And management seems equally resolute. Long strikes often produce many losers and no winner. Boeing loses a reported $100 million in revenues each strike day, union families sacrifice savings that could be put to better use, and local and regional economies suffer. A swift settlement that keeps Boeing competitive is in everyone's best interest.

The drama has already played out in the automobile business, where the once-dominant Big Three hemorrhage red ink, shed jobs and struggle to catch up with their more nimble international competitors. Still, they stumble under the weight of the enormous legacy costs of unsustainable pension and health-care obligations. Displaced autoworkers painfully learned that paper contracts don't provide job security.

Competitive, profitable employers do.



Richard S. Davis writes on public policy, economics and politics. His e-mail address is richardsdavis@gmail.com.
© 2009The Daily Herald Co., Everett, WA