In Our View: Boeing Lands a Hard Truth

Moving jobs out of state to save money, despite tax breaks, is cost of business

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Boeing’s decision to move thousands of jobs out of the state understandably rankles Washington taxpayers — and yet it represents the realistic cost of doing business.

Late last year, the Washington Legislature lavished upon Boeing the largest corporate tax break in American history — $8.7 billion through 2040 — to ensure that the company will build the 777X airplane and its composite wing in the state. But that largesse hasn’t prevented Washington’s largest private employer from deciding to transfer a large chunk of engineering jobs out of the Northwest. Most recently, officials said they will send 1,100 engineering positions from the Boeing Research & Technology unit out of the Puget Sound region, and another 200 will be moved from Southern California.

The reason? Money, of course.

Internal company documents acquired by The Seattle Times indicate that Boeing expects to save more than $100 million a year from the most recently announced transfers. The documents reveal that company officials are willing to spend more than $150 million to implement the plan, which would close research labs in Washington while moving the work to three new “centers of excellence” in Alabama, South Carolina and Missouri.

Moving the operations will allow the company to hire a large percentage of entry-level engineers and to do so in states with lower wages than workers earn in Washington. The result: Instant savings. The assessment from Ray Goforth, executive director of Boeing’s engineering union: “So they really are just trying to drive out the older people to lower their labor costs. Wow.”

That’s one analysis, and labor leaders have reason to complain about the move; so do taxpayers. Late last year, during a special legislative session called by Gov. Jay Inslee, lawmakers agreed to a historic tax break for Boeing in order to keep the 777X in the state. But, as Alex Pietsch, director of Inslee’s office of aerospace said, “Boeing is living up to its promise with its announced intention to build a 1.65-million-square-feet expansion. We are disappointed about these engineering job moves. But the incentive package was about the 777X work and that’s what we bought with those investments. We shouldn’t do anything to put that in jeopardy.”

While the loss of the engineering jobs is frustrating, and union officials have called for new conditions to be placed on Boeing’s tax breaks, the situation points out some truisms of economics. South Carolina and Alabama — two of the three states to which Boeing is moving the operations — are right-to-work states. Essentially, such states have limited the power of labor unions by not requiring employees to be members. That helps to keep down labor costs.

Arguments abound over whether right-to-work laws are good for workers and good for the overall economy, but they certainly are good for employers, and that is a reality that Washington must contend with. In Forbes’ 2013 rankings of the states with the best business climates, six of the top seven were right-to-work states. Thanks to improved market information and streamlined transportation, companies and workers are more mobile than ever — as Boeing demonstrated when it moved its headquarters out of the Seattle area to Chicago in 2001.

Washington largely has a pro-business ethos, and the state placed ninth in Forbes’ rankings of business climates. But there are some drawbacks, as well. In this case, saving more than $100 million a year is an easy call for Boeing, even if it irks employees and taxpayers.