Free Markets, Free People
Honest to goodness, if this doesn’t blow your mind, I don’t know what will.
Yet the Boeing case has a scarier aspect missed by conservatives: Why is Boeing, one of our few real global champions in beefing up exports, moving work on the Dreamliner from a high-skill work force ($28 an hour on average) to a much lower-wage work force ($14 an hour starting wage)? Nothing could be a bigger threat to the economic security of this country.
We should be aghast that Boeing is sending a big fat market signal that it wants a less-skilled, lower-quality work force. This country is in a debt crisis because we buy abroad much more than we sell. Alas, because of this trade deficit, foreign creditors have the country in their clutches. That’s not because of our labor costs—in that respect, we can undersell most of our high-wage, unionized rivals like Germany. It’s because we have too many poorly educated and low-skilled workers that are simply unable to compete.
We depend on Boeing to out-compete Airbus, its European rival. But when major firms move South, it is usually a harbinger of quality decline.
Wow … really? So all those F-35s being built in Ft. Worth, and all those C-130s and F-22 Raptors being built in Marietta, GA, not to mention the myriad of car manufacturing plants, specialty steel plants, hi-tech industries, etc. all have seen ‘quality declines’ because they’re located in the South?
Good grief, my guess is this guy hasn’t been out of Chicago since 1970? You’ve got to love the correlation he tries to draw between “high-skill” and $28 bucks an hour with “low-skill” and $14 bucks an hour. Yeah, that works, doesn’t it? It’s a bit like saying a guy who opens and closes a blast furnace door at $28 bucks an hour is a “high-skilled” worker. Doesn’t correlate at all does it? But that was an actual wage for an actual job at a steel plant before it went out of business because it was uncompetitive, thanks to unions, years ago.
If you haven’t figured it out yet, the guy writing this is a labor union lawyer and he thinks everyone who reads the Wall Street Journal is an idiot.
Here’s his one and only example of why he thinks he’s got this all figured out. As he says, he “represented the workers” in the first plant. He’s speaking of Outboard Marine Corp:
In the 1990s the company went from the high wage union North to the low wage South and was bankrupt by 2000. There are reasons workers in the North get $28 an hour while down in the South they get $14 or even $10. Adam Smith could explain it: "productivity," "skill level," "quality."
Of course the reason it went bankrupt might have absolutely nothing to do with any of that. It might be because the corporation was uncompetitive well before the move and the move was a last ditch effort to save itself. But we don’t know, and this yahoo decides it is “productivity”, “skill level” and “quality” which were the problem. Of course BMW’s plant in SC doesn’t suffer from any of those problems does it? In fact one of the reasons the Germans are making their cars there is because of the productivity they achieve there. Same with all the car plants across the south to include those opened fairly recently by Honda, Kia, Hyundai, BMW, and Mercedes – in Tuscaloosa, Alabama for heaven sake. The reason they’re in the South is they get more “productivity”, “skill” and “quality” for the wage than they do in the North.
But to admit that would be to admit that perhaps the problem is unions, not Southerners.
However, our clueless lawyer isn’t done:
Here is yet another American firm seeking to ruin its reputation for quality. Why? To save $14 an hour! Seriously: Is that going to help sell the Dreamliner? In terms of the finished product, the labor cost is minuscule: $14 in hourly wage, at most. It’s incredible that conservatives claim such small differences in labor cost would be life or death to Boeing. It’s not labor cost but labor skill that is life or death to the survival of Boeing, never mind pilots and passengers.
If the history of runaway shops proves anything, it’s that many go "South" in more than one sense of the word. If that sounds unfair to the South, it is union busting that has inflicted the real unfairness in the region: income inequality and inferior schools.
Yessiree – those airplanes they’ve been building in Marietta GA and Ft. Worth TX have just been falling out of the sky because of all that income inequality and those inferior schools. What, no “redneck”, “hillbilly” or “barely in shoes” included? No NASCAR jokes? Remarks about family trees that don’t fork? Dueling banjoes? He missed his chance, didn’t he?
Of course the reason Boeing is opening a plant in SC has nothing to do with wages per se. His point is correct as far as it goes. The plant is opening so Boeing and its customers aren’t held hostage to the work stoppages that are normal fare in the union plant in Washington. And it is hard to blame them for doing that, isn’t it?
Of course pig-headed ignorance about an area like this simply has to be seen to be believed and he proves himself as the poster boy for that. If abject and unqualified ignorance is bliss, this is one happy, happy labor lawyer.
Wow … 2011 and you find something like this in the Wall Street Journal. Who said their editors don’t have a wicked sense of humor?
Give ‘em enough rope …
[HT: J.E. Dyer]
President Obama promised a new sort of presidency. And he’s delivered – Chicago politics in DC:
If Obamacare is so great, why do so many people want to get out from under it?
More specifically, why are more than half of those 3,095,593 in plans run by labor unions, which were among Obamacare’s biggest political supporters? Union members are only 12 percent of all employees but have gotten 50.3 percent of Obamacare waivers.
Emphasis mine. 12% get 50% of the waivers. Got a “gold plated health benefit package” but don’t belong to a union? Tough.
Pure and simple, this reflects who makes up the Democrats real constituency. The NLRB reflects it as well – see the Boeing stupidity and the attack on right-to-work states and the attempt to deny non-union workers their jobs.
But back to the waiver point. One of the things I constantly harp on is the fact that we supposedly are a nation that abides by the rule of law, not the rule of men. And that means something:
One basic principle of the rule of law is that laws apply to everybody. If the sign says "No Parking," you’re not supposed to park there even if you’re a pal of the alderman.
The special dispensation granted through 50% of the waivers to this point to a favored constituency seems to clearly point out that the law is at best being selectively applied (and the reason seems pretty obvious).
As for the NLRB":
Another principle of the rule of law is that government can’t make up new rules to help its cronies and hurt its adversaries except through due process, such as getting a legislature to pass a new law.
Chicago cronyism on a national level. And, you can be sure the unions will spend their members money to re-elect the politicians who favor them.
Yes friends, “hope and change” have taken on a new distinctly Chicago machine sort of air, haven’t they?
The other day I was on a conference call with representatives of ExxonMobil as they tried to explain why the upcoming attempt to remove certain tax breaks was a bad idea. I was struck by a statement one of the representatives made:
The thing that tends to get lost is we’re the home team here. And you have two – if the government is looking, U.S. government is looking to raise revenue and they’re looking at our industry, they really have – it’s coming down to two choices, it appears. They’re looking at, right now, singularly focused on increasing tax, our taxes, as a way to increase revenue coming into the government. But study after study show that if you increase access, increase business opportunity for our industry, give us access to more resources to go explore and develop, give equal treatment to downstream investments, that by increasing access, you will increase revenue.
And by – and you will increase revenue by magnitudes more than by focusing just on raising taxes. And by giving us – the industry more opportunity to explore, develop, refine, what have you, that increases jobs. And jobs increases overall social welfare. [emphasis mine]
ExxonMobil employs about 84,000 people directly world wide (the oil industry in the US, both directly and indirectly is responsible for over 9 million jobs). In the US, that part of the total is 35,000. Now imagine if, instead of doing everything in their power to stand in ExxonMobil’s way, the government actually did what the ExxonMobil representative lays out? The result would be as he concludes – more jobs, more revenue for government, and more opportunities in the works for both in the near future. Right here.
Instead of that, however, we see government doing everything in its power to hurt the “home team”. I asked, given the situation here and the fact that ExxonMobil derives much of its income from outside the US (~75%), whether the sort of shenanigans now being attempted by Congress and the administration would have an effect on corporate planning:
Well, we approach our investments on a global basis, and obviously it’s – the money that we’re investing is our – it’s money – it’s not our money; it’s our shareholders’ money. And we’re looking to make investments that are safe; they are going to make consistent returns over a long period of time, given the nature of our business; and obviously, government policy and the consistency of government policy is an important criteria for us as we look at projects that are competing for our investment dollars around the world.
So to the extent that United States policy makes an investment, for example, in a U.S.refinery less attractive than an investment in a similar operation outside the United States, is that something we will consider? The answer’s yes, of course we’ll consider it.
You can’t ask for a clearer answer. What is it the Democrats in Congress are doing? Well they’re playing politics with American jobs. In essence they’re trying to repeal tax breaks , but only for the oil industry. Specifically (thanks Neo):
Intangible Drilling Costs – Companies which engage purely in energy exploration and discovery can recover their costs related to exploration at tax time at a rate of 100%. This lessens the burden on energy providers for the number of “dry holes” which may be found in the process. Integrated companies (i.e. “big oil”) can recover these exploration costs at 70%.
Domestic Manufacturer’s Deduction (Section 199) – A deduction (not a credit) equal to 9% of income earned from manufacturing, producing, growing or extracting in the United States, is available to every single taxpayer who qualifies in the U.S. The oil and gas industry, and only the oil and gas industry, is limited to a 6% deduction.
Percentage Depletion – The percentage depletion deduction is a cost recovery method that allows taxpayers to recover their lease investment in a mineral interest through a percentage of gross income from a well. This depletion method is not available to companies that produce oil as well as refine and market it (i.e. “Big Oil”.) This is available to all extractive industries (gold, iron, clay, etc) in the US and is in no way unique to the oil and gas industry.
Note that none of these are “subsidies”, nor (other than intangible drilling costs) are they unique only to the oil industry (although the oil industry is the only industry that is limited in the Section 199 deductions). We hear Democrats whine constantly about the loss of manufacturing jobs, yet here they are pushing for tax changes that will likely kill good high paying manufacturing jobs in a critical industry. Not only that, but as API’s chief economist, John Felmy points out they will also hurt our economy in other areas and possibly lessen our energy security by driving future jobs off shore:
[T]he more we invest here, the more we produce, the more we have improved energy security and, really importantly, it reduces he trade deficit. And for every reduction in the trade deficit means that’s dollars that aren’t lowing abroad and can be spent here, and adds further to the U.S. economy that we desperately need.
Those are extremely important points, points that are being virtually ignored by the Democrats and the administration in this headlong rush to “punish” big oil for “excess profits” and more importantly, as a means of taking the political heat off themselves and their absurd and self-defeating economic policies. Somehow, one assumes, they believe that if they tax the oil industry more, then gas will cost less – go figure.
Read the transcript of the call I’ve linked above. Check the numbers out. It is eye-opening.
And the oil business isn’t the only target of such nonsense. Jim McNerney, CEO of Boeing, covers the NLRB/Boeing debacle in today’s WSJ – something I pointed out a week or so ago. The National Labor Relations Board (NLRB) has gone to war against another home team – Boeing. Here’s a company doing precisely what you’d expect the administration would applaud if they at all believed their rhetoric about “jobs, jobs, jobs”:
Deep into the recent recession, Boeing decided to invest more than $1 billion in a new factory in South Carolina. Surging global demand for our innovative, new 787 Dreamliner exceeded what we could build on one production line and we needed to open another.
This was good news for Boeing and for the economy. The new jetliner assembly plant would be the first one built in the U.S. in 40 years. It would create new American jobs at a time when most employers are hunkered down. It would expand the domestic footprint of the nation’s leading exporter and make it more competitive against emerging plane makers from China, Russia and elsewhere. And it would bring hope to a state burdened by double-digit unemployment—with the construction phase alone estimated to create more than 9,000 total jobs.
Eighteen months later, a North Charleston swamp has been transformed into a state-of-the-art, green-energy powered, 1.2 million square-foot airplane assembly plant. One thousand new workers are hired and being trained to start building planes in July.
It is an American industrial success story by every measure. With 9% unemployment nationwide, we need more of them—and soon.
Pretty hard not to agree with that, right? And, the administration and Democrats have told the America people repeatedly that their focus is on jobs. But in the example above about the oil industry and this example about Boeing, the rhetoric does not come close to supporting reality In reality, they’re at war with the job creators:
Yet the National Labor Relations Board (NLRB) believes it was a mistake and that our actions were unlawful. It claims we improperly transferred existing work, and that our decision reflected "animus" and constituted "retaliation" against union-represented employees in Washington state. Its remedy: Reverse course, Boeing, and build the assembly line where we tell you to build it.
And, as with ExxonMobil, the government’s actions have consequences that it either doesn’t understand or doesn’t care about. McNerney lays them out for you in the cold light of economic reality and, as you’ll note, it’s not much different than ExxonMobil’s answer:
The world the NLRB wants to create with its complaint would effectively prevent all companies from placing new plants in right-to-work states if they have existing plants in unionized states. But as an unintended consequence, forward-thinking CEOs also would be reluctant to place new plants in unionized states—lest they be forever restricted from placing future plants elsewhere across the country.
U.S. tax and regulatory policies already make it more attractive for many companies to build new manufacturing capacity overseas. That’s something the administration has said it wants to change and is taking steps to address. It appears that message hasn’t made it to the front offices of the NLRB.
We are in some dire economic times right now, and we have an activist government that is saying one thing but doing another. It is telling us how critical jobs are to our economy on the one hand while, in two very important examples, doing everything in their power to discourage large American companies from creating them.
This is nothing more than political payback and cronyism. At risk are the lives and livelihoods of thousands of Americans, put at risk to satisfy a political agenda. The oil industry is not a favored industry of the left, so the administration and Democrats are doing their level best to drive it off, just when untold amounts of new fossil energy has been discovered (shale). Boeing, on the other hand, isn’t serving a favored constituency as the administration and Democrats would prefer. So they have attacked that company as well.
Both are extraordinarily bad precedents and symptomatic of a toxic political atmosphere in which the administration and Democrats are engaged in trying to pick winners and losers. They are also engaged in serving favored constituencies rather than doing all that is necessary to encourage and invite domestic American industries (the home team) to create jobs. Their actions border on the criminal and are inexcusable – especially in these tough economic times when Americans are suffering from the economic downturn.
These are actions that by government that must be stopped and stopped now. And Democrats need to be put on notice that their ploy to punish the oil industry is transparent partisan politics and wholly unacceptable to the American people.
It is a battle between a business’s best interests and about its fundamental right to make decisions about how it conducts its business and the government’s "right" to interfere and dictate how and where it will do its business.
In what may be the strongest signal yet of the new pro-labor orientation of the National Labor Relations Board under President Obama, the agency filed a complaint Wednesday seeking to force Boeing to bring an airplane production line back to its unionized facilities in Washington State instead of moving the work to a nonunion plant in South Carolina.
One of the reasons the South has thrived while the Rust Belt has, well, rusted, is companies have taken advantage of the “right to work” rules in most Southern states to locate there without fear of work stoppages at every turn. That would seem to be a fundamental right that any business should enjoy, the right to locate their business where they feel their best interests are served. What the government is saying is that’s not true – if you have union employees elsewhere.
In its complaint, the labor board said that Boeing’s decision to transfer a second production line for its new 787 Dreamliner passenger plane to South Carolina was motivated by an unlawful desire to retaliate against union workers for their past strikes in Washington and to discourage future strikes. The agency’s acting general counsel, Lafe Solomon, said it was illegal for companies to take actions in retaliation against workers for exercising the right to strike.
First, it’s not “retaliation” if the facts in the story are correct. Boeing has hired 2,000 more employees – union employees – at the Washington state plant since the decision was made to add a second assembly line and do it in South Carolina. So A) it’s not taking jobs away and B) the additional jobs since the decision hardly speak of “retaliation” in any sense a rational person would be able to discern.
Second, the “complaint” comes as the plant in South Carolina nears completion and 1,000 workers have been hired there.
So, given those facts, this is a crap statement (that’s technical talk):
In a statement Wednesday, Mr. Solomon said: “A worker’s right to strike is a fundamental right guaranteed by the National Labor Relations Act. We also recognize the rights of employers to make business decisions based on their economic interests, but they must do so within the law.”
This is the usual duplicitous talk you get from this administration – acknowledge the right of the employer to make business decisions based on their economic decisions and then immediately deny what was just acknowledged. This too is crap":
“Boeing’s decision to build a 787 assembly line in South Carolina sent a message that Boeing workers would suffer financial harm for exercising their collective bargaining rights,” said the union’s vice president, Rich Michalski.
No, they haven’t sent such a message. What they’ve said is they have a backlog of orders and can’t afford (business interest) work stoppages every 3 years while unions negotiate a new contract. That is a legitimate concern. And they want some sort of continuity built into the productions system that accounts for that probability. No one is denying union workers their “rights” in Washington nor have any union employees been fired because of them – again, since the decision to locate in SC was made, 2,000 additional union employees have been hired there.
What’s is happening here is government has chosen to take sides and is attempting to intimidate Boeing. The side it has picked – surprise – is the union side. And it plans to use its power to attempt to force a company into doing something which is not in its best business interests, despite the lip service Solomon gives that “right”. But there’s no “hostile business climate” here, is there?
The company also said it had decided to expand in South Carolina in part to protect business continuity and to reduce the damage to its finances and reputation from future work stoppages.
And in a free country, Boeing would have every right to expect to be able to do that without interference.
As the monstrosity that is ObamaCare is gradually phased in, expect to see more and more companies saying this:
"The newly enacted health care reform legislation, while intended to expand access to care for millions of uninsured Americans, is also adding cost pressure as requirements of the new law are phased in over the next several years," wrote Rick Stephens, Boeing’s senior vice president for human resources.
And with that, Boeing has informed its workers that their premiums will be going up. Why? Well they have a “Cadillac” plan apparently:
Spokeswoman Karen Forte said the Boeing plan is more generous than what its closest competitors offer, and the company was concerned it would get hit with a new tax under the law.
The tax on so-called "Cadillac" health plans doesn’t take effect until 2018, but employers are already beginning to assess their exposure because it is hefty: at 40 percent of the value above $10,200 for individual coverage and $27,500 for a family plan.
Of course, that’s just not “fair”, is it?
One has to wonder, though, if Boeing may not be playing a little politics here, following McDonald’s example – make this visible and see if the administration won’t do for them what it did for McDonalds … issue them a waiver.
After all the administration that arbitrarily enforces the law in other areas certainly would trade a waiver for better PR as they did with Mickey D’s, wouldn’t they.