“No Man’s life liberty or property is safe while the legislature is in session”.

- attributed to NY State Judge Gideon Tucker

Tuesday, June 21, 2011

Misinformation & Disinformation Regarding the Boeing South Carolina Facility

Sometimes I think the Wall Street Journal publishes editorials with little merit both in order to appear to present balanced views and to let readers see how silly and shallow some liberal views truly are.

If so, a recent editorial by Thomas Geoghegan entitled Boeing's Threat to American Enterprise surely qualifies. Geoghegan is evidently a union-representing attorney, so it's not surprising that his perspective is a liberal one. But it also seems to have seriously affected what passes for analysis on his part.

His editorial contains quite a bit of bluster and slanted characterizations of the Boeing situation. Geoghegan matter-of-factly describes Boeing CEO's McNerney's explanation of the opening of its Charleston, South Carolina Dreamliner facility as "payback" for past machinists' strikes in Washington state. It's more likely that, rather than being a second facility, the South Carolina facility would have become the primary and sole assembly site, had Boeing really intended such "payback."

However, what caught my attention was the author's baldface contention that companies which have relocated from largely union shop states in the north of the US to right-to-work states south of the Mason-Dixon line have mostly failed. For example, he wrote,

Why is Boeing, one of our few real global champions in beefing up exports, moving work on the Dreamliner from a high-skill work force ($28 an hour on average) to a much lower-wage work force ($14 an hour starting wage)? Nothing could be a bigger threat to the economic security of this country.

"We should be aghast that Boeing is sending a big fat market signal that it wants a less-skilled, lower-quality work force. This country is in a debt crisis because we buy abroad much more than we sell. Alas, because of this trade deficit, foreign creditors have the country in their clutches. That's not because of our labor costs—in that respect, we can undersell most of our high-wage, unionized rivals like Germany. It's because we have too many poorly educated and low-skilled workers that are simply unable to compete."
The author's lack of understanding of economics begins to be apparent in those passages. He summarily equates lower wages with lower skills, ignoring the effect of unions on wages. Plus he freely tosses in macroeconomic fiscal and monetary policies to cloud the very issue he purports to illuminate.

Then Geoghegan delivers his main point,

"We depend on Boeing to out-compete Airbus, its European rival. But when major firms move South, it is usually a harbinger of quality decline. Over and over as a labor lawyer in the 1980s and '90s, I saw companies move away from Chicago, where the pay was $28 an hour, to some place in South Carolina or Louisiana where the pay was about half that. While these moves aggrieved me as a union lawyer, it might have consoled me as an American if those companies went on to thrive globally.

But too often, alas, it was the beginning of the end, as it was for Outboard Marine Corporation, where I once represented workers. In the 1990s the company went from the high wage union North to the low wage South and was bankrupt by 2000. There are reasons workers in the North get $28 an hour while down in the South they get $14 or even $10. Adam Smith could explain it: "productivity," "skill level," "quality."  "

I was expecting another five or six clear-cut examples, but Geoghegan only offers Outboard Marine. We don't know the nature of the market, the firm's competition or overall competitive position. Instead, Geoghegan hangs the firm's ultimate demise purely on its choosing to employ less-expensive labor in the South.

Nowhere does Geoghegan mention that two premier German luxury auto makers, BMW and Mercedes Benz, located US plants in South Carolina. Of course, those examples give the lie to his argument, so that explains their omission.

"Here is yet another American firm seeking to ruin its reputation for quality. Why? To save $14 an hour! Seriously: Is that going to help sell the Dreamliner? In terms of the finished product, the labor cost is minuscule: $14 in hourly wage, at most. It's incredible that conservatives claim such small differences in labor cost would be life or death to Boeing. It's not labor cost but labor skill that is life or death to the survival of Boeing, never mind pilots and passengers."

Ironically, though Geoghegan claims familiarity with McNerney's reasons for Boeing's South Carolina facility, he evidently missed the main one. It's not the hourly labor cost but the need to have a reliable assembly facility not prone to wildcat or other work stoppages which would affect Boeing's ability to deliver its planes to customers as promised.

Some people call that "quality," as in a non-quantitative reason to buy a product. On-time delivery would seem to fall in that category.

Geoghegan then repeats his contention that companies relocating to the South of the US fail, without a single additional example,

"If the history of runaway shops proves anything, it's that many go "South" in more than one sense of the word. If that sounds unfair to the South, it is union busting that has inflicted the real unfairness in the region: income inequality and inferior schools."

Funny how economists have missed what only Mr. Geoghegan knows: that it's the absence of unions in the South that account for its "inferior schools." If true, why would Mercedes and BMW deliberately locate there? Are we to infer that those companies sought out the least-educated workforce possible to man their American production facilities?

Then Geoghegan skips to another point, and it's a socialist one,

"At this moment especially, deep in debt, we cannot afford to let another company like Boeing self-destruct. Boeing is not a product of the free market—it's an extension of the U.S. government. Over the years, our taxpayers have paid to create a Boeing work force with exceptionally high skills. That work force is not just an asset for Boeing—it's an asset for the country. Why should the country let Boeing take it apart? Every American should be rooting for the NLRB's general counsel, as the board itself has not yet found a violation."

I guess that comes as a surprise to Boeing shareholders. Now we learn that Boeing's workforce, which doesn't actually "belong" to Boeing, thanks to our country's free market principles, has been developed to be an asset "for the country" which the firm is going to "take...apart." The author's contentions smack of raw socialism. Everything a company has is government-provided, and what it creates is common property, too. At least Geoghegan isn't shy about displaying his socialism.

His final paragraph reveals his deep misunderstanding of how Boeing operates.

Most depressing of all, Boeing's move would send a market signal to those considering a career in engineering or high-skilled manufacturing. It is a message that corporate America has delivered over and over: Don't go to engineering school, don't bother with fancy apprenticeships, don't invest in skills. No rational person wants to take on college or even community college debt to come out and work on the Dreamliner—which should be the country's finest product—for a miserable $14 an hour. If a single story in the news can sum up the reasons for America's global decline, it's the decision to build a Dreamliner that will gut the American dream."

I wasn't aware that Boeing's engineers are unionized. Or that machinists designed the Dreamliner. All through his editorial, Geoghegan has argued on behalf of the unionized machinists on whose behalf the NLRB's attorney has attempted to stop Boeing's South Carolina plant. But Geoghegan ends his piece arguing on behalf of skilled engineers who are not the subject of the fight over Boeing's Charleston facility.

Aside from the wandering, ill-focused nature of his editorial, I found Geoghegan's lack of extensive convincing examples of his main contention, that moving facilities to the South US causes business failure, to render his position completely lacking in credibility. The rest of his poorly-reasoned piece only adds evidence of the weakness of his case.


Steve said...

Well done. I thought many of the same things when I read his piece this morning.

You mention Mercedes and BMW. I was also thinking of many of the Japanese and Korean auto makers who have chosen to build and operate plants in the South.

The author of that piece seems to think that America can only perform well in industry north of the Mason Dixon line. Has he looked at the state of Detroit over the past generation or two? They have a $30/hour workforce that is highly trained and we needed to spend billions in taxpayer dollars to keep them afloat. I didn't see any other auto makers, many of which are in the South, asking for taxpayer bailouts.

Luke said...

I'm not sure if you were being sarcastic: "I wasn't aware that Boeing's engineers were unionized." The implication being that they aren't...you should know that yes, most of Boeing's engineers are unionized, and I'm one of them. Not by choice of course.

Otherwise I completely agree with you. This garbage needs to end. As a Boeing employee I am paying for it twice, through my taxes to the NLRB and ultimately through my paycheck because of all the money Boeing is having to spend on it.

C Neul said...


Tx for your remarks.


C Neul said...


Thanks for your comment, too.

Funny you should ask, because I almost went to search on the topic of Boeing's engineers being unionized. I didn't think it made sense, but, somehow, thought I'd once read that you are.

So now I know. Probably like my school teacher friend in NJ, you'd prefer not to belong, but you don't have a choice?


Luke said...

Well officially I am a "Beck Objector," so I am officially a member but I pay a reduced union fee (supposedly the percentage that they spend on political action). Make sure your teacher friend knows of that right!

I think I've read somewhere (and this is just my own speculation) that 80% of the engineers in Washington are full members. But in my limited experience (I don't talk about my views on the union at work), most are ignorant of their Beck rights.