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Pensions Trump Job Security in Strike at Boeing

October 5, 2005
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The recent strike at Boeing by 18,300 members of the International Association of Machinists and Aerospace Workers demonstrates how pension concerns have taken precedence over other issues--including job security--for at least some workers.

During the weeks of heated negotiations preceding the strike that began September 1, the union, whose members’ average age is 49, refused to budge on the issue of pensions. In its third and last contract proposal, Boeing offered lump-sum bonuses of $5,000 over two years to about 17,500 machinists in the Puget Sound, Washington, and Gresham, Oregon, areas. It also offered a 2.5 percent wage increase in the third year of the contract, an incentive pay program that would provide five days of pay to Oregon and Washington workers if the company made target, expanded health care options and $66 per month in pension payments for every year worked, up from $60. The union was seeking $80 per month.

On September 23, Boeing management finally budged. The company has agreed to, among other things, increase the monthly pension payments to $70 per month, undo a provision that would have made union members pay higher medical insurance costs, and provide for a straight 8 percent bonus based on last year’s salary as well as a $3,000 cash bonus in the second and third years of the contract.

It had been management’s stance on pensions that was the biggest slap in the face to the union members, says Connie Kelliher, a spokeswoman for the International Association of Machinists and Aerospace Workers. “We were very clear that pensions were the top issue from the beginning, and the $6 increase is the lowest percentage that they have offered since the plan was established in 1955,” she says.

Given that Boeing made an after-tax profit of $1.87 billion last year, it seemed that it could offer more in pension payments and still be competitive, Kelliher says.

According to Stephen Sleigh, director of strategic resources for the machinists, it will cost Boeing $23 million to increase it to $70. He estimates that the $10 increase translates to a $230 million liability. Boeing spokesman Chaz Bickers declined to give specific estimates on the pension costs.

The speed with which Boeing management conceded to the machinists’ demands may prompt more unions to follow in their footsteps. As baby boomers retire and more pension defaults hit the headlines, industry observers expect to see more unions focus their attention on pensions. This makes sense particularly for employees in high-paying jobs, such as those at Boeing, where the average annual machinist salary is $58,000. Also, these workers are likely to be more successful in getting the public’s support by focusing on pensions rather than wages, says Philip Rosen, a managing partner at Jackson Lewis, a law firm that represents employers.

“They are doing what any good union leaders would do. Boeing has received some pretty good orders and they didn’t want a strike, so it was a good time for the unions to negotiate for more,” says Lowell Peterson, at attorney at New York-based Meyer, Suozzi, English & Klein who represents unions. “When times get bad, they are going to be asked to give some of it back, so they may as well get what they can while they can.”

Jessica Marquez

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