Boeing Workers Trying to Stop a Bad Bonus Policy
When giant Boeing Co. spoke in 1983, many employers around the country listened, and millions of workers suffered the unhappy consequences: Christmas bonuses in their paychecks instead of far more valuable permanent wage and benefit increases.
The International Assn. of Machinists must shoulder part of the blame because it signed the contract with Boeing that created the bonus system.
The union’s action was understandable. Its leaders and members approved the deal because the company convinced them that the economic situation then was rocky and that a lid on wages and benefits was essential to keeping Boeing competitive with other aerospace firms around the world.
The result: Wages of Boeing workers have remained almost flat for seven years, and since most benefits are tied to wages, they, too, have been almost stagnant.
All the while, the company has reaped enormous savings on its labor costs and has prospered as never before, with an $8-billion backlog of orders to keep things humming for the next several years.
The day of reckoning came Oct. 3. That was when 57,000 machinist union members struck in an attempt to repair the damage that they did to themselves and other workers by accepting the 1983 contract.
Negotiations between the union and company didn’t resume until last Wednesday, but pressure for a settlement is heavy, since Boeing produces more than 60% of the world’s commercial planes. That means that the company is a crucial factor in much needed exports and so affects the entire U.S. economy.
Also, Boeing’s massive share of the world’s plane production is essential to airlines trying to replace old equipment.
The settlement, when it comes, could and should once again set a pattern--this time one of reversing the trend to bonuses in lieu of raises and improvements in benefits.
Bonuses have long been common in American business, but they usually amount to a few extra bucks, or maybe a Christmas turkey. The Bureau of Labor Statistics estimates that only about 165,000 workers, or 2.5% of those in unionized companies employing 1,000 or more, were paid bonuses in lieu of pay raises before the Boeing plan began to spread.
And spread it did in the past seven years. Now, nearly 2.5 million workers, or 42% of those in that category, are under a bonus system. Millions of other workers also lost money when they were given bonuses instead of wage hikes. There is no exact count of the number, however, because the government does not measure bonuses given to non-union workers or to employees in unionized companies with a work force of fewer than 1,000.
Such a system might make sense when a company is losing money or barely breaking even. Many workers in the past few years reluctantly agreed to cuts or freezes in their wages and benefits to help keep companies afloat and preserve their jobs.
And bonuses were a pretty sweet way to swallow the economic medicine of wage cuts or freezes that the companies said were so urgently needed. Many workers, including those at Boeing, did receive some wage hikes in the form of cost-of-living increases, but these were not enough to keep up with inflation.
Clearly, however, that urgent need to hold down labor costs no longer exists at Boeing. The company posted record profits of $614 million last year on sales of $17 billion, and earnings are still at record levels this year.
So, even before the strike, the company relented--a bit. It offered modest wage hikes, but combined them with smaller bonuses to make up partially for the raises that the employees have missed over the years.
Not all workers are scornful of those bonuses, even though they amount to much less money than wage increases.
With pay for lots of compulsory overtime, Boeing workers average about $35,000 a year. That is enough to make a virtual wage freeze for seven years seem almost tolerable, since their stagnant wages were augmented with a bonus of several thousand dollars a year, paid just in time for the holidays.
The overtime money was welcomed, but that, too, became less and less attractive as the years wore on and workers began to realize that they were putting their minds and bodies under enormous stress. Many worked exhausting 12-hour days, seven days a week for weeks on end.
Yet they had no choice, and compulsory overtime, too, is a key issue in the dispute.
But the bonus system is the one with nationwide implication, and many workers overlook how much less rewarding bonuses really are compared to old-fashioned increases in their basic wages and benefits. A neat bonus coming in one lump all at once at year-end seemed better than a few dollars more in the paycheck each week.
It was not better, of course, although it took time for that fact to sink in.
Using graphs and charts, union officers explained it this way: Since 1983, Boeing has paid six bonuses equal to 31% of a worker’s gross pay. For someone earning $12 an hour, the bonuses totaled $7,737.
If the bonus money had been folded into basic wages each year, it would have compounded and produced new income of $25,938 for such a worker, instead of $7,737.
Boeing officials don’t quarrel with the union’s figures and maintain that despite the company’s profits, they are not excessive compared to Boeing’s competitors.
Boeing says it must keep prices low and pay raises down because of continuing competition, particularly from Airbus Industrie, the government-subsidized European consortium.
But the Boeing strikers decided that now is the time to share in the company’s prosperity, and if bad times come, then will be the time to consider concessions once again.
Incidentally, Boeing executives seem to understand the bonus vs. wage hike argument. They like bonuses, but they also like increases in their basic income. Boeing Chairman Frank Shrontz, for instance, got a 15% pay hike last year, which brought his income to $846,323 a year, plus expenses.
