Right To Work

 
 

Right-to-WorkA couple of recent articles in Puget Sound Business Journal relating to the pros and cons of Boeing’s development of manufacturing facilities in South Carolina reflect the fact that Washington State is debating whether and how it should act to attempt to protect the high-paying jobs that the aerospace company and its related infrastructure provides.

And in those deliberations and discussions among policymakers and elected officials about Washington vs. South Carolina, it is really for the first time that the issue of Right to Work is getting mentioned in a serious way.

A right-to-work law is a statute in the United States that prohibits union security agreements, or agreements between labor unions and employers, that govern the extent to which an established union can require employees’ membership, payment of union dues, or fees as a condition of employment, either before or after hiring.

“Right-to-work” laws do not, as the short phrase might suggest, aim to provide a general guarantee of employment to people seeking work …

“Right-to-work” laws do not, as the short phrase might suggest, aim to provide a general guarantee of employment to people seeking work, but rather are a government regulation of the contractual agreements between employers and labor unions that prevents them from excluding non-union workers, or requiring employees to pay a fee to unions that have negotiated the labor contract all the employees work under.  These laws are adopted on a state by state basis.

The most recent of the articles in PSBJ was on July 16, 2013.   The Puget Sound Business Journal published a rebuttal article by Stan Sorscher representing the Society of Professional Engineering Employees in Aerospace ( SPEEA).   This article was a rebuttal to a previous article in the PSBJ discussing the likely further loss of Boeing engineering and manufacturing jobs from Washington State.

In his rebuttal, Mr. Sorscher argues that as South Carolina is a low wage state, Boeing employees there are paid less than a fair wage and that those workers “have lower wages and less job security”.   He also argues that if we shift economic and political power away from workers, families and communities in Washington, economic inequality will continue to grow and that workers and unions will not be stakeholders in our democracy.

As the article points out, Washington has a world class aerospace cluster employing more than 130,000 people.   When you consider the supporting infrastructure of that cluster, the number of employees easily more than doubles.

Thus the question: What obligation does Boeing have to these people in Washington?

As with any corporation and especially a publicly traded entity, Boeing’s primary obligation is to its shareholders.   These are the people who have invested in the company with the expectation of obtaining a fair (and we can argue about what’s fair) return on their investment.   In order to grow and prosper, a company must continue to be an attractive investment to providers of capital.

In order to do that, Boeing must continue to offer products of a design and quality that its customers want to buy.   And since their true obligation is to their capital providers, the role of management is to offer those products in the most cost effective way, maximizing profit.

Cost effective certainly does not necessarily mean the absolute lowest cost; but rather the combination of cost and quality that best meets the needs of the company and its customers.

And if this means building its products in South Carolina, or elsewhere, instead of Washington, then that is a sound management decision.

In our turnaround practice, we work with clients whose businesses have declined precipitously due to the loss of a significant customer.  And as revenues and profits decline in those businesses, the need to reduce costs has an impact on the number of jobs in those companies.   And those reductions not only impact those companies but trickle down to the accounting firms, attorneys, restaurants, dry cleaners, daycare centers and other businesses that support the employees of those companies.

A state or community’s obligation is to do what it can to safeguard those jobs by assisting the companies that provide large numbers of them to operate as cost effectively as possible within the state or community.   And that’s where taxes, regulations and issues like the cost of labor come into play.

While the article in question concerns itself with “workers’ rights” and the policies regarding Washington becoming a “right to work” state or not, we need to consider that in the end …

Boeing or any company is going to build its products where it is the most cost effective for them as a company. 

We also need to consider that each large employer job that leaves our state affects a number of other jobs, mostly with smaller companies that have little or no connection to Boeings’ union or other issues.