tv Inside Story Al Jazeera January 6, 2014 5:00pm-5:31pm EST
>> this is al jazeera america live from new york city. i'm tony harris with a look at today's top stories. the u.s. supreme court has put a temporary stop on same-sex marriages in utah. it will give time to give a ruling. a possible extension of jobless benefits and confirmation of janet yellen as head of the federal reserve. the oldest daughter of former vice president dick cheney stepped down today. she's calling it quits because
of health issues in her family. the iraqi military said it is ready to fight to regain control of fallujah from fighters linked to al-qaeda. a woman linged to jihadists is accused of beal involved in a murder plot. she had agreed to kill a swedish artist who had offended muslims. for the latest on any of our stories head over to our website at www.aljazeera.com. inside story is next on al jazeera. >> after threatening to look for greener pastures, bow something staying in washington state to build its dreamliner after tax concessions from the state and
concessions from its workers. that's the inside story. ♪ >> hello, i'm ray suarez, for decades boeing in the seattle region have been nearly synonymous. governors have worked hard to make it happy, and elected officials from the state has been supported by them, and the company has maintained it needs more than that to be competitive. when union negotiations got difficult, it showed it would ready to go elsewhere for its labor. what the company got and what it got is symbolic of what it takes in the new world in labor and tax policy or a troubling way to do business?
>> tonight our members accepted boeing's proposal. >> reporter: in a deal passed by the slimmest of margins, boeings' machinist accepted a contract to build the boeing 777 x in the region. a cost of living and so thousand dollars signing bonus for current employees. >> tonight washington state secured it's future as aerospace capitol of the world. tonight boeing announced that the carbon fiber wing assembly and the fuselage assembly work will be done in the state of utah. >> reporter: boeing employs 174,000 people with 85,000 in and around the seattle area.
the contract secures jobs in the region until the year 2022. >> mostly i feel pressure for the community. i'm voting yes. >> it's a big decision. a lot of people are looking at us, and i'm going to vote no. >> reporter: the decision was difficult for the 30,000 members of the international association of machinists. in previous negotiations union members rejected contracts that would move their pensions to a 401k style. over 20 states applied to the airliner to bring their company to their state. >> if they don't get what they want they'll take the airplane away from us. >> it's the future of flight unfolding. >> reporter: with estimates of
the 777 x line was worth 20,000 jobs and $20 billion in economic growth boeing was essentially pitting state against state. in the end washington state passed a series of tax breaks adding up to $8.7 billion. it's the largest state tax subsidy granted to a company in u.s. history. >> boeing ensures the company will remain in the state for years to come in a big way, but not without controversy. many americans are wondering whether the price washington state paid for high-paying manufacturing jobs is worth it. joining us to discuss washington state's tax incentive package with boeing and contracts with the company is alex pete who helped craft the tax incentives.
hohow do you calculate the retun to your state when you make an offer like this to your company? >> i think its important to understand that the incentives are an extension of an existing suite of tax incentives first adopted in 2003 for the 787. so far over the first ten years of those incentives the aerospace industry in washington state has enjoyed $1 billion worth of reduced tax burden, but that has generated $4 billion in revenue to the state of washington. so in november the legislation adopted an extension of those legislation and over that same period we estimate that
aerospace economic activity in the state of washington will generate more than $21 billion in revenue to the state. so we think this is a great investment, and we're happy to make it to support the aerospace industry in washington state. >> the machinists and the company didn't see eye to eye, and almost two dozen states jumped in to the bidding, was washington state forced to enter this kind of competition? just being the historic home of the company and putting out a competitive product was not enough? >> we know in the aerospace industry in particular it's a very competitive industry. clearly states across the country and countries around the world want a piece of what washington state has. so when the company came hand in hand with its machinist union, this is what it needed.
one, continuation of tax benefits, workforce training, streamline permitting, the state was eager to act on those things. but in addition the second thing was the competitive contract with its machinist union, and clearly this was a difficult proposition for members of the machinist union to accept, but in the end a slim majority of them felt that guarantee of a long-term job outweighed the reduced benefits. >> with the contract quite apart from the dealings of the company and the state, does washington state have to engage in this kind of competitive bidding in order to keep employers like boeing in the state? >> well, the past two--the past two--with the 787 we competed we
well. the 737 max was decided in 2011 in washington state won that work as well. i fully believe that the next time a new airplane comes around we'll have to demonstrate our competitiveness again, and in the meantime we'll build thousands of airplanes and keep tens of thousands of people employed. >> if you're in mullman, spokane, vancouver, some space away, what is in it for you. your state is going to collect billions less in taxes. are you going to see something tangible out of the deal? >> aerospace is statewide in washington. there is an aerospace provider here in the 35 in 39 of our counties. the folks on the eastern side of the state are doing great work
for boeing and airbus and bombard yay, and they'll continue to do that work having washington being the hup of commercial activity around the united states and a key leader around the world is important for washington. >> incentives for companies to stay in the state is part of the game. but does it distort the operation of a state like washington and distort capitalism? can you just compete on the merits, or do you have to forego collecting millions of dollars in taxes? must you do that just to remain in the game? >> i think a competitive tax structure is part of the game. that combined with a well-trained workforce, an education system that it
provides excellent workers, these are all things that go into citing decisions for major international companies. we demonstrated this past weekend that washington is ready on all those fronts. >> the director of the governor's aerospace office in the state of washington. thanks for joining us. >> happy to be here. >> we're going to take a short break, and when we come back we'll talk more about states competing for jobs with big tax breaks, and we'll dig into the machinists' union contract and what it gave up to keep working in washington state. this is inside story.
>> welcome bac back to "inside story," i'm ray suarez. on this edition of our program we're talking about the new deal between boeing and the machinist union that keeps the production of the 777 x airliner in the state of washington. the state gave boeing big tax breaks but the union als also ge concessions, particularly on retirement. the company will shift to a 401k
style plan. we'll go to a professor at university of cauniversity of california-berkeley. and from seattle, scott hamilt hamilton, managing director of liam company. professor, let me start with you, apart from the scale which is new and big, aren't these trends already established in american manufacturing? right-to-work states trying to pull work out of closed shops, the end of benefit pensions, moving to 401ks and workforce is interchangeable. if we don't make it with you, we'll make it with somebody else? >> they sure are there in force. this isn't a new story. there is a poisonous atmosphere when it comes to unions in the private sector throughout the united states and in
manufacturing. the pressures of global competition are very fierce. you bring all that together, and there is terrific pressure on workers and unions. >> did the boeing workers have to take the vote they did to keep the work? and did the state of washington have to give back the potential tax revenue that it did in order to keep the jobs in washington? >> well, on one level what we're seeing here is states with taxpayers funds to raise incentives. but there are not a lot of alternatives. in the issue of tax rates for the state of washington was something that they simply had to do. which is something that we need to address on a national and international basis. we can't simply address it on a state basis. in terms of the contract there were some important gains long-term here for works and for
unions. specifically we're talking about a very advanced form of manufacturing, america's leading exporting company, which is boeing, doing their future work in seattle in the puget bay area with an unionized highly paid workforce. were there concessions involved to get this location? there were including the very painful concession of moving to a traditional defined benefit pension plan to a 401k. some of that was made up with a more generous formula for the 401k, that was tough for unions. but what these workers got long term is this work 8,000 to 20,000 new jobs, machinist jobs with very advanced technology that could define this industry going forward, carbon fiber composites, all of that is very important for the future, and
we're looking at a highly competitive company, a very strong union working together to define an industry in a global context. it doesn't make these concessi concessions any less painful. these workers worked very hard over many decades to get here. they took important freezes or concessions in previous years, but within the context this is out there this agreement provides long-term benefits. ironically at the end of this period, at the end of the ten years the union and the workers could be in a stronger position as a result of that simply because so much of boeing advanced production is going to be in the puget sound area. >> scott hamilton, you're an old hand at this industry. you heard alex peach from washington state talk about how they may have to do this all over again when this production
is done and they'll have to reenter and bid against other states again. is it every over? >> they absolutely will have to do this again. boeing has made it clear as part oof policy that boeing will compete every airplane that comes down the pike. boeing indicated the 737 max in 2011, i'm not sure how serious that was, but that was their indication, that one stayed here. we saw what happened with the 777 x. the 757 replacement for 2025. the we're going see the states have to pony up tax incentives again. we'll see boeing coming back to the unions and asking for more alterations with the contracts. >> i asked mr. peach, i'll try asking you, is it enough to be
the historic center of an industry that has attracted highly skilled, highly educated workers to that core, and has the wherewithal to build a good product, is that enough any more? >> no, it's not. aside from the fact that boeing and this is really applicable to many other companies, wants to have competitive wages or wages even within the company competing against the established workforce, here in the puget sound area we have a different problem. we have earthquake zones across the area. if there is a huge earthquake in renton, boeing would be out of business. if i was boeing i would be looking at other locations just out of a management risk. >> alan, you heard alex peach
explain the deal that washington state made with boeing. does this work for states? do the numbers add up to you? >> no, they don't. states do have to compete for highly mobile businesses, a lot of manufacturing that can move, but there are right and wrong ways to compete. you cathat's ultimately washington's real problem. if you look at incentives that boeing was asking for they are entirely oriented to one tax, gross receipt tax the business occupation tax. this tax instead of taxing the profits of a corporate or the corporate income, it actually taxes all of their sales, all of their-- >> and airplanes are a pretty big thing. >> they're pretty big things to be selling. bow something profitable but when you're talking about that sides of capital investment
going in, taxing all of the sales instead of the profits is burdensome. they're trying to leverage this to a corporate income tax somewhere else. it doesn't make it justified, it just tells washington state that they have a structural problem that they should be looking into. that's not affecting just boeing but every washington business that files through the corporate code that affects microsoft that works there. i believe there is a large food products company that received an incentive several years back as well. every washington company is going to be suffering this. >> every washington company, isn't this a game that entered in to by states, east, west, north and south, isn't this built in now as a part of the way companies compete against each other? >> it's not. different states offer different amounts of incentives. some states like illinois have tried the strategy of high taxes, generous services and it
doesn't work. other states, i like to bring you have florida, has much smaller incentive passage. they do offer some. no one is perfect, but much smaller passage but they have lower taxes at the same time. which leads to businesses being treated more fairly, and ultimately states that don't offer incentives, they don't seem to be wallowing in a lack of jobs, they just have different jobs. >> we're going to take a short break. when we come back we'll talk about what it means to make skilled workers demand less money for the work they do and demand less in benefits. this is inside story.
>> welcome back to inside story. i'm ray suarez. on our program we're examining the new deal between boeing and the machinist union in washington state. what are the ramifications for big business, union labor contracts and state competition for jobs, and scott hamilton, i'm wondering when you look at place like germany, they've chosen a high-skill, high wage, high value export model for their economy, and here in the united states even these highly skilled, highly trained workers are faced with very heavy downward pressure on future benefits and future earnings. is bowing a very profitable company forced to do this? or is it just something they want to do? >> it's something that they want to do. obviously they need to be concerned about costs, particularly because the airbus partly based in germany.
but if bow something that concerned about cost they should not have in october before the first vote authorized $10 billion in stock by back and increase stair holder dividends by 50%. if that's a big concern, they should be hording that cash. >> what kind of message does that send to the workers on the eve of the vote. >> they were just ticked off as all get out. >> making them what, less likely to go for boeing's initial offer? did the company shoot itself in the foot? >> in the november 13th vote the union rejected the contract by 2-1 margin. between november 231st and the january 3rd vote there was so much community pressure and so much fear that boeing was not bluffing, that you had a reversal of that vote with the 51-49 approval. but for boeing to make that dividend and shareholder buy
back announcement immediately before that november 13th vote was tone deaf in the extreme. >> quickly before we go, what lesson if any should other unionized workers in manufacturing draw from this? >> well, i think that--i agree with what was just said. it was truly tone deaf to increase dividends and do a $10 billion stock buyout on the eve of a ratification vote. what is key for boeing's future is they have one of the most skilled workers in the world in the puget sound area. they have high experience, high skill, high productivity and strong innovativeness on the job. that's the core of boeing's competitiveness going forward. it was penny-wise and pound foolish to press down hard on wages and benefits in the hope of increasing perhaps the dividend a bit more at the expense of alienating a
workforce. as it is there is an important part of this model looking forward. the u.s. with its largest exporter with one of the most advanced manufacturing companies in the world will be competing with the unionized workforce with high wages, and with some very important benefits still intact. that's a model for competitiveness going forward, and it really requires attracting the best and the brightest and paying the wages and benefits doing that going forward. >> as we look down the road and you look over the country, do you see more of these kinds of deals coming? >> we hope not, for sure. states are going to keep trying to do this as long as there are businesses that they can hope to lure. but realistically the way this stops, it doesn't stop when businesses stop trying to improve their bottom lines. that's their duty to their shareholders. they'll keep asking for
incentives if state legislators offer them. it's when state legislators get on board with the idea that the best way to promote their state is not with hand outs but with treating businesses equally. >> thank you all, that brings us to the end of this edition of inside story. thanks for being with us. the program may be over, but the conversation continues. we want to hear what you think about this or any day show. you can log on to our facebook page. you can sent us your thoughts on twitter. you can direct me directly in washington, i'm ray suarez.