Boeing's Puget Sound Job Cuts Have Unions Questioning Billions in State Tax Breaks

By Justin Bachman
October 01, 2014 - Businessweek

Boeing (BA) plans to move about 2,000 engineering jobs from Washington state to other, lower-cost regions over the next three years. That news, announced Monday, came less than 11 months after state lawmakers approved the most lucrative package of tax incentives in U.S. history—$8.7 billion—so Boeing would keep its new 777X program in the area. Given Boeing’s record of moving jobs to states with lower wages, union members in the Puget Sound area are grumbling that Washington’s political leaders missed a critical chance to tie employment to tax breaks.

“Why are Washington taxpayers subsidizing Boeing to move thousands of jobs out of state?” Ray Goforth, executive director of the local Society of Professional Engineering Employees in Aerospace, which represents more than 2,200 Boeing workers, said in a news release. In April, Boeing said it would move 1,000 engineers from Washington, where it has about 5,200 defense jobs today, to Southern California. The engineers union—which adopted the slogan “No nerds, no birds” during a 40-day strike in early 2000—has been working with the International Association of Machinists to “educate legislators and let them know what’s lacking in the current bill,” says Bill Dugovich, a spokesman for the SPEEA. “The bill includes no accountability measures, no requirement that jobs be maintained or be created.”

The jobs Boeing will move from Washington are in the company’s defense unit, connected to engineering support roles for the F-22 Raptor, B-2 Stealth bomber, and the airborne early-warning and control system (AWACS) jets and cruise missiles. Most of the work will go to Oklahoma City, with about 500 jobs expected in St. Louis, where Boeing’s Defense, Space & Security division is based. Some of the jobs will move to Florida and Maryland.

“The decision to consolidate these activities was difficult because it affects our employees, their families and their communities,” Chris Chadwick, chief executive of the defense and space business, said in a statement. “However, this is necessary if we are going to differentiate ourselves from competitors and stay ahead of a rapidly changing global defense environment.” A spokeswoman for the defense and space unit, Yvonne Johnson-Jones, said Boeing does not disclose projected cost savings from such labor transfers.

The company said it would offer Seattle-area engineers positions in its commercial jet business when possible and provide “job search resources, retirement seminars, and career counseling services” to those who cannot transfer.

Boeing is the largest corporate taxpayer in Washington and employs 53 percent more people than a decade ago, says Alex Pietsch, director of Governor Jay Inslee’s Office of Aerospace. Many people mistakenly think the future tax incentives represent money the state is paying Boeing and other employers, he added. The $8.7 billion value of the tax breaks is a “theoretical” figure that is “really just a derivative of the economic activity here in the state of Washington” generated by aerospace employment.

The legislation that Washington passed extended tax relief to 450 eligible aerospace businesses, including Boeing. That would have made it hard, Pietsch said, “to create some sort of a job target at a single company.”