Boeing, 777x, and Machinists Union

[HFWR]

Quote:

Originally Posted by kiki At some point we need to support job creators. If we don't, then somebody else will. It's great that the workers don't want to give in, but what will they say when they end up with nothing except an unemployment check?

I agree with this in theory, except lots of us have ended up with the unemployment check anyway...

[Fermion]

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Originally Posted by haha Seattle is definitely an island of weirdness. Ha

No, that is Fremont.

[Hamlet]

Here's the thing--

In a world with a surplus of labor you get downward pressure on wages.

Instead of wages being set by the productivity of production, they get set by how desperate the workers are. The share of GDP going to labor has been dropping, and it appears to me that it will continue to shrink--

Workers

I think that this has a lot to do with the weakness of the global economy. How is demand going to be generated for products if the bulk of workers have less to spend every year? A billionaire generates a fraction of the demand that a thousand millionaires generate. So we see companies with soft revenue numbers, but they have higher profits because they cut costs (wages). Of course, globally that makes everyone's revenues softer, so they cut wages some more.

I think the global economy will eventually collapse if we don't start seeing some of the benefits of productivity gains start making it down to the masses again.

Quote:

Originally Posted by ERD50 More of this 'race to the bottom' talk? If you were trying to feed your family in an area w/o much manufacturing, and a big manufacturing plant moved in, and offered you a steady job at better compensation than you could get previously, would that feel like a 'race to the bottom' to you? Or would it look more like, 'Those greedy people in the old plant didn't know how good they had it. We're happy to work for less than they were asking.' Is it bad to bring help to those who most need it? In other conversations, this is called re-distribution of wealth, and is applauded by many. Is it different when a corporation does it? Is it different when we do it (shop for the best value, rather than shop to support the highest wages on the producer side)? I guess I don't see any reason to be judgmental about it. If we have freedoms, then we (and corporations) will make these choices. It's natural. And I think it is good for America. What long term good would it be to discourage efficiency and productivity? -ERD50

[explanade]

When unions had more leverage and more workers were unionized in the post-WWII period up to the mid '70s, GDP growth was much higher and per capita income growth greater.

Funny how that worked out.

[Texas Proud]

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Originally Posted by growing_older Well, and maybe no wonder. If the machinists turn down a commitment for decades of future work with angry rants about the company taking advantage of them, then the company will probably want the work to go somewhere else. In an interesting twist, some big customers for 777x have been making public statements today that they want their planes built in ONE PLACE, whether it's the Puget Sound or elsewhere. But they do NOT want the kinds of problems the 787 suffered from being build by separate groups all over the world and then crammed together (sort of) in final assembly.

I would be very surprised if any complex machine was built all in one place.... heck, most cars are built in many countries and assembled at one location....

[samclem]

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Originally Posted by explanade When unions had more leverage and more workers were unionized in the post-WWII period up to the mid '70s, GDP growth was much higher and per capita income growth greater. Funny how that worked out.

Be sure to keep cause and effect in the right order. It's unlikely an increase in umbrella sales causes rainy weather.

[2B]

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Originally Posted by haha I see; I didn't understand the thrust of your post. Seattle is definitely an island of weirdness. Ha

Seattle was an island of weirdness in 1965 when I arrived.

[2B]

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Originally Posted by explanade When unions had more leverage and more workers were unionized in the post-WWII period up to the mid '70s, GDP growth was much higher and per capita income growth greater. Funny how that worked out.

In post-WW II the USA was the industrialized world. As Europe and Asia (mostly Japan) rebuilt, the USA's ability to economically dictate the competitive situation disappeared. I've listened to this unions=prosperity argument before but it somehow never includes the broader macro-economic picture. The other favorite is high taxes rates=prosperity during the same period. It also never includes the macro-economic picture or the infinitely available tax shelters available so no one actually paid the high marginal tax rates.

My father was a unionized steel worker and went through many strikes and layoffs before finally losing his job in the early 1960s. The loss of this entire industry resulted from the unwillingness of the union (there was really only one for all of the steel companies) to adjust to a changing world economy. This did allow me to enjoy the largess of free government peanut butter, cheese, butter, rice and probably other items. I really enjoyed when we had a food drive for "the poor" at my elementary school and we got a box of can goods dropped off that afternoon. After about a year after he lost his job we became migrants out of the Pennsylvania rust belt.

France, Greece, Italy and much of Europe have very powerful unions that can effectively dictate economic policy. How's that working out for their GDP growth? Major manufacturing corporations are getting out as fast as they can. Germany is the one exception and you can see a partnership in many ways between their unions, industry and government.

My apologies to any moderator that feels my remarks that were intended to address an economic comment with an economic reply is considered to be too political.

[pb4uski]

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Originally Posted by haha ....Seattle is definitely an island of weirdness. Ha

At least you guys have confined it to one city..... here in Vermont, it seems to have taken over the whole state!

I guess that's what happens when you mix carrot crunchers, greenies and trust fund babies.

[ERD50]

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Originally Posted by Hamlet Here's the thing-- In a world with a surplus of labor you get downward pressure on wages. Instead of wages being set by the productivity of production, they get set by how desperate the workers are. The share of GDP going to labor has been dropping, and it appears to me that it will continue to shrink-- ...

I agree on the first line, but I don't think there was ever a time when wages were set by the worker's productivity. They were set by supply/demand. Businesses pay the lowest amount they can to attract the talent they need. Talent seeks the highest wages they can get for their 'product'.

Now, worker productivity can result in lower overall production costs, meaning a productive company can undercut the competition. With lower prices, there may be more demand for the product, and that cycles back to more demand for workers.

-ERD50

[jon-nyc]

My 2c, the union almost certainly shot itself in the foot, but it's hard to call them 'greedy' given that they were asked to absorb a material cut to their overall compensation.

I'd say they were unrealistic, even stupid, but not greedy.

[growing_older]

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Unions can be a funny thing. I find it hard to imagine that the rank and file would vote down a contract that the union was truly recommending for passage.

I don't think there was any question about the union leadership recommending this contract for passage. They generally referred to it as garbage or worse, and in news reports before the vote the Union leadership was tearing up copies of the agreement and recommending rejection.

The union rally before the vote was strongly against the contract:

https://www.youtube.com/watch?v=KpT65aDxQiY

[pb4uski]

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Originally Posted by jon-nyc My 2c, the union almost certainly shot itself in the foot, but it's hard to call them 'greedy' given that they were asked to absorb a material cut to their overall compensation. I'd say they were unrealistic, even stupid, but not greedy.

+1 but sometimes a half a loaf is better than none, and it look like they may end up with none unless they come to their senses.

[Hamlet]

In a a tight labor market, wages tend to rise in lock-step with productivity because workers have a strong bargaining position. Look at wages vs productivity in the US from 1945 to 1970. They were linked.

Yes, lower wages have resulted in lower prices, but the lower wages are hurting demand more than the lower prices are helping demand. Take it to its logical conclusion -- unpaid labor. How much demand are unpaid interns adding to the economy with their non-existant purchasing power?

In the US, its actually way worse than it looks, because Federal spending has done a decent job of propping up demand. Imagine the hit that US business sales would be taking if we didn't have SS, food stamps, unemployment insurance, medicaid, and a trillion dollar defense budget propping up demand?

Quote:

Originally Posted by ERD50 I agree on the first line, but I don't think there was ever a time when wages were set by the worker's productivity. They were set by supply/demand. Businesses pay the lowest amount they can to attract the talent they need. Talent seeks the highest wages they can get for their 'product'. Now, worker productivity can result in lower overall production costs, meaning a productive company can undercut the competition. With lower prices, there may be more demand for the product, and that cycles back to more demand for workers. -ERD50

[2B]

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Originally Posted by pb4uski +1 but sometimes a half a loaf is better than none, and it look like they may end up with none unless they come to their senses.

I suspect any changes will be evolutionary. The real impact won't be felt for 5 to 10 years but it will be real obvious after the 777x plans are announced. This will be followed by 1 to 2 years of attempted renegotiation by the union and governmental bodies which may or may not fall on deaf company ears. The question then becomes what will Boeing do with the facilities in the greater Seattle area. Boeing has other businesses besides the 777x.

Even with Microsoft and Amazon, Boeing is a big contributor to the financial status of the Seattle area. If/when they are materially gone, they will be noticed.

[ERD50]

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Originally Posted by tinlizzy Third paragraph The parties agree that the Company may subcontract or outsource certain 777X wing fabrication and assembly work packages, in whole or part, in order to create capacity for other 777X work packages in the Puget Sound facilities, and/or to efficiently utilize those facilities to accomplish the production and assembly of the 777X. ....

This was amazing to me. I worked in non-Union manufacturing, and the idea that the workers would dictate decisions about what and where we would do our manufacturing is totally foreign to me.

That's a decision for management to make. That is why they are called management.

-ERD50

[bld999]

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Originally Posted by ERD50 This was amazing to me. I worked in non-Union manufacturing, and the idea that the workers would dictate decisions about what and where we would do our manufacturing is totally foreign to me. That's a decision for management to make. That is why they are called management. -ERD50

I have seen members of the local ironworkers union successfully claim and subsequently install gage metal doors and frames in a building with a structural steel frame [their usual work]. You can imagine the outcome there; but yes, unions will if powerful enough, participate in those kinds of decisions.

[ERD50]

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Originally Posted by Hamlet In a a tight labor market, wages tend to rise in lock-step with productivity because workers have a strong bargaining position. Look at wages vs productivity in the US from 1945 to 1970. They were linked. ....

I think this lacks a a cause-effect.

There are plenty of reasons for rising wages in that period. A 'tight labor market' in and of itself is one - the supply/demand proposition that I made in that post. High demand and low supply (tight labor market) provides a strong bargaining position.

And that was largely driven by the US rebuilding a war ravaged world.

If productivity drives the price of something, then the hardware store would charge me a different amount if I bought a hammer for personal use around the house, or that same hammer to build a house. One hammer would be far more productive than the other - yet they sell for the same price.

-ERD50

[2B]

Quote:

Originally Posted by ERD50 I agree on the first line, but I don't think there was ever a time when wages were set by the worker's productivity. They were set by supply/demand. Businesses pay the lowest amount they can to attract the talent they need. Talent seeks the highest wages they can get for their 'product'.

I agree with the wages being a question of supply and demand. Productivity is more a reflection of what value an "owner" can derive from the cost of the labor and other product costs. Whips may make the unskilled slave drag the stone block harder or faster but that's the limit achievable.

Technology is key to substantial improvements in productivity. The stone blocks can be moved quicker when the new technology of greased rollers is introduced. This introduces the need for a higher skilled individuals to place the rollers and direct the greasers. Beating these guys won't really increase productivity but "profit sharing" might.

The need for a higher skill level reduces the supply side since a higher educational level is required. There are multiple examples in history where higher level skills are protected via secrecy and/or guilds to maximize compensation.

I've spent a good portion of my career automating processes. This was usually justified by labor savings (evil me). I might eliminate 10 low skilled positions but replace them with capital equipment (built by more skilled labor) and then operated/maintained with 2 or 3 skilled individuals. As the cost of unskilled labor increases, the justification to automate and improve productivity increases. The cost of unskilled labor can either go up due to unaltered supply and demand or government decree. Either way, the urge to automate will increase.

[explanade]

Quote:

Originally Posted by 2B In post-WW II the USA was the industrialized world. As Europe and Asia (mostly Japan) rebuilt, the USA's ability to economically dictate the competitive situation disappeared. I've listened to this unions=prosperity argument before but it somehow never includes the broader macro-economic picture. The other favorite is high taxes rates=prosperity during the same period. It also never includes the macro-economic picture or the infinitely available tax shelters available so no one actually paid the high marginal tax rates.

Nobody is making that claim, that unions=prosperity.

But income inequality was less and the middle class saw real income gains. That probably did better for aggregate demand than the current situation, with stagnant real incomes for all but the highest income tiers.

Whether the income gains back then were due to the leverage unions had, or the fact that all workers, including non-unionized workers, received benefits and income gains.

BTW, it didn't take long for Japan, Germany and others to ramp up. By the 70s, they were economic powers.

US companies, despite the huge trade deficit, sells globally. The tech industry manufacturers electronics in China and sell them all over the world. Back in the '60s, global trade wasn't what it is now, nor the level of US exports. Certainly American companies established global brands like Coke. However, I would expect that most sales came from domestic sales, vs. the typical 50% international sales volumes that most typical US-based multinationals see.

So you think much higher GDP in the '60s was in spite of real income growth for the middle classes (comprised of both unionized and non-unionized workers)? Would GDP growth have been even greater if there was the same level of income inequality and stagnant middle class income growth that we have now?