When Covid-19 brought the US economy to a standstill in the spring of 2020, America’s top executives called for a “national conversation” about the need for workers to return to work, warning of an “economic catastrophe” if they didn’t. I wrote at the time that a conversation we also needed to have was one about giving workers the security of a living wage. So, when I read the news that Boeing Co.’s machinists approved a new labor contract on Monday, locking in a hike of nearly 44% over four years, it was clear to me that the deal they struck was inevitable.
A shocking percentage of full-time workers don’t earn enough to raise a family, and that was true even before the recent spike in inflation made everything a lot more expensive. As much as two-thirds of full-time workers age 25 and older can’t cover the basic necessities for a family of four with one parent working, according to wage data from the Bureau of Labor Statistics and living wage estimates from the Massachusetts Institute of Technology.
It’s this reality that has injected fresh vigor into labor action in recent years. Unions have scored first-time organizing wins at companies across industries including at Starbucks Corp., Apple Inc., Wells Fargo & Co. and Amazon.com Inc., while picketing workers have won record pay increases in some cases. Boeing’s is the latest victory, and expect more to follow as more workers refuse to show up for work that doesn’t allow them to pay the bills.
In the Seattle area, where Boeing produces most of its aircraft, a living wage is roughly $50 an hour for a family of four with one adult working, according to MIT’s living wage calculator, or about $104,000 a year based on a 40-hour work week. It’s probably no coincidence then that Boeing’s labor deal will raise the average machinist’s annual wage to $119,000 over four years. Assuming 3% annual inflation, a living wage for a family of four will be closer to $117,000 in four years, very nearly matching what Boeing’s workers agreed to.
The substantial wage increase shows the degree to which Boeing’s workers fall short of a living wage. It’s a harsh truth that Boeing could easily hide from investors because public companies — even the biggest, most vital among them — are not required to disclose how much they pay workers, a hole in their financial statements that regulators should plug.
Why should investors care? Because Boeing demonstrates that cutting corners with your workforce carries a cost.
Even without pay disclosures, there have been signs that Boeing was squeezing its workers. The company grew earnings by 11% annually from 1988 to 2019, a year before it started losing money. Most of that earnings growth came from expanding profit margins — that is, Boeing’s efforts to reduce operating expenses relative to sales, which presumably included keeping wages to a minimum. From 1987 to 1989, Boeing’s profit margin averaged 2%; by the late 2010s, it had swelled to double digits.
Now it seems as if Boeing merely delayed a reckoning, one that Covid may have accelerated but which would have eventually come. I can imagine Boeing executives saying a decade ago that they couldn’t afford to pay workers more, even though their own financial statements would have betrayed them. The truth is they couldn’t afford not to. How much of the company’s recent travails — the design flaws, the loose bolts, the sliding quality, the rumored coarsening culture — could have been avoided with greater care for its workforce? Most of it, I suspect.
That includes the roughly 17,000 jobs Chief Executive Officer Kelly Ortberg is cutting. Some will blame those cuts on workers’ demands for higher wages. The reality is that Boeing could have afforded to give its workers a raise when it boasted double-digit margins several years ago. Yes, pay raises would have lowered profitability for a time, and likely Boeing’s stock price, but probably nowhere near the 60% decline in the company’s stock after successive scandals since 2019.
That should be a wakeup call to corporate executives — and their investors. The first step is for companies to disclose how much they pay workers so that investors can evaluate the extent to which wages are inadequate and may be a hidden liability.
I get that $119,000 sounds like a lot of money, particularly to those who remember when good jobs paid much less. But that’s what it costs to raise a family where Boeing’s machinists live, and there’s nothing they can do about it.
That basic reality is why I believe Boeing is just the beginning. More workers will rightly ask employers what the point is of going to work every day if they can’t earn a living. The longer corporate executives fail to answer, the harder and more expensive it will be to tackle that question.
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