Union rejection of Boeing contract “credit negative” for Washington state

The harmful economic fallout from the Machinists Union’s decision November 13th to reject Boeing’s long-term contract offer continues.  Moody’s Weekly Credit Outlook on U.S. Public Finance for November 21st reports the union decision is “…increasing the likelihood the company will pursue out-of-state manufacturing locations to produce its new 777X jetliners.”  If that happens, “it would be a credit negative for the State of Washington,” according to Moody’s analyst Andrea Unsworth.

The severity of the economic hit state is undeniable.  Moody’s reports “…the agreement would have ensured that thousands of high-paying, highly skilled aerospace manufacturing jobs stay in the region,” and, “The company and its suppliers, employees and other related companies generated approximately $76 billion in economic activity for the state in 2012.” The analysis notes the devastating impact such a loss in economic activity would have on state and local sales tax collections and on state Business and Occupation tax collections.

The bad news is the culmination of policies long pursued by Democratic office-holders that have enhanced the power of their union allies.  A series of Democratic governors have consistently blocked worker-rights reforms that would have reduced the power of unions to disrupt the state’s manufacturing economy.

For example, In Governor Gary Locke signed legislation giving public sector unions collective bargaining power within the state budget, meaning increases in pay, benefits and unions dues collections are decided outside the legislative process.  Christine Gregoire was a close political ally of labor unions, increasing taxes in 2005 and pumping millions of additional money into spending which in turn, through mandatory dues, enriched union bank accounts.

For Governor Jay Inslee, union money was a key element in his campaign for governor. In return, he remains stoutly opposed to worker choice legislation or any reform that would limit the political and economic influence of unions.  Even the skilled machinists who voted for the contract offer and want to work on Boeing’s 777X airplane under the new employee plan will be barred from doing so by mandatory union rules.

In 2008 the Machinists Union went on strike for eight weeks, costing Boeing an estimated $100 million a day.  The company wanted a new agreement that would ensure the labor peace in the aerospace sector at least through 2024.  The union said no.  Their refusal may downgrade Washington’s credit rating and deliver a major political blow to Jay Inslee.  Given the risks they face, Democrats may wish they had found ways to reduce the union’s ability to hurt the aerospace industry when they had the chance.