Aerospace workers in Washington State made a clear statement in favor of rising living standards. It's a rare pause in the middle class decline of the last 30 years.
Members of the Aerospace Machinists union rejected a collective bargaining proposal, full of historic takeaways, by a margin of 2-1.
The employer is Boeing, a premier aerospace employer. Boeing, like many other large employers, uses its impressive political and economic power to extract gains from all of its stakeholders.
In 2003, Boeing extracted over $3.2 billion in tax incentives from the state legislature to "win" production of the new 787 airplane. Within a few years, the incentives were expanded, and modest accountability conditions disappeared from the incentive package. The win turned sour in 2007. Boeing opened a second 787 production line in South Carolina, sending a clear message that $3.2 billion buys less love than anyone thought.
In November 2013, Washington state tax incentive extended the tax incentive, reducing Boeing's taxes by $8.7 Billion, out to 2040. This is far and away the biggest state tax incentive in American history.
For the last 10 years, Boeing has paid net negative Washington state corporate taxes. Similarly, Citizens for Tax Justice reports Boeing enjoyed a net negative federal tax rate for 2007-2009,
Kansas suffered similar treatment. Boeing assured the Kansas Congressional delegation that the $35 billion Air Force tanker program would bring work and employment stability to Boeing workers in Wichita. Shortly after winning the contract, Boeing moved that work to Oklahoma City, and closed the Wichita facility.
Boeing, GE, Wal-Mart, and other major companies tell suppliers to find productivity improvements and lower costs. They extract those gains from their suppliers in advance. Suppliers bear extra risk, especially in the highly cyclical and volatile aerospace industry.
While extracting gains, Boeing also demands public commitment to transportation, education, worker training, and streamlined regulatory processes.
Boeing has exceptional bargaining power, when negotiating for state incentives. The logic is simple. "This work is critical to your future. We can move this work anywhere. You must make concessions to keep these jobs. You will be worse off if you don't." True to form, the Machinists were threatened with losing their jobs unless they accepted takeaways.
The Machinists' vote makes them the first stakeholder to stand up to that threat and say, "This is bad for me, bad for my family and bad for my community. I say NO!"
I remember a time when the point of public policy was to raise my standard of living. For the last 30 years, we've followed a different principle - make business succeed. Of course, we could get both, higher living standards AND successful businesses - if we shared the gains workers produce.
Except we don't.
An old joke comes to mind. "Why does a dog lick his [nether regions]? Because he can."
The dog, in this joke, is oblivious or indifferent to social disapproval regarding personal grooming. People know dogs do that, so no one attempts to change the dog's behavior.
When a dominant employer makes demands, some local opinion leaders fall over themselves demanding that workers accept a slow decline in living standards, rather than standing up for better living standards and better economic prospects for our children and future generations.
At each step, a large employer with dominant bargaining power extracts gains at the expense of workers and communities who have little or no bargaining power. Step by step, we give up small slices of the future. Jobs disappear in textiles, steel, wood products, furniture, home electronics, semiconductors, flat screen TVs, solar panels, software and R&D. Millions of middle class jobs are replaced by millions of low-wage jobs in the service economy.
Wal-Mart perfected this business strategy in the retail sector. Boeing is adapting the same strategy to an upscale manufacturing industry.
Because they can.
These large dominant employers are thinking and acting strategically to advance their own interests. It works for them - 93% of new wealth goes to the top 1%.
This "new normal" started in the mid-70s, with a fundamental change in business philosophy in America. Business executives turned away from whatever Social Contract we had, coming out of World War II.
This is not a pendulum that will naturally swing back. We are experiencing a steady decline toward an unstable unsustainable future.
This won't work. No society has prospered with this level of inequality and asymmetric political and economic power. If this Lesser America is our new normal, then we will be fighting over the last kernel of corn on the table.
Members of the Machinist union - a visible legitimate credible stakeholder - have said, "No!"
Their work has dignity. They create value. Design and production workers helped rescue the 787 program which was in chaos and threatened disaster for the entire company. Workers have earned a fair share of the gains they create.
The purpose of an economy is to raise living standards. I'm happy for business to succeed, as long as gains are shared. There is no legitimate policy purpose to have business succeed at the expense of workers, families and communities.