Economy & Innovation
4:10 pm
Mon January 13, 2014

Why Boeing Contract Has Implications For The Middle Class

Originally published on Fri January 10, 2014 9:21 am

Transcript

DAVID GREENE, HOST:

Workers at Boeing were in a difficult spot last week. Their employer offered a new contract cutting back retirement and health benefits. It came with what looked like a threat. The company said it might have to move important operations out of Washington State and hire new workers. Union members approved the contract, barely, and Boeing is staying put.

Journalist Hedricks Smith written about the decline of the middle-class. In an op-ed for the Los Angeles Times, he says Boeing just contributed to that.

Thanks for coming on the program. We appreciate it.

HEDRICKS SMITH: My pleasure, David.

GREENE: I want to ask you, you wrote that this vote at Boeing had large implications for middle-class America. That's pretty sweeping language. Tell me what you mean.

SMITH: Well, people ask me, I wrote this book, "Who Stole the American Dream?"

GREENE: Right.

SMITH: Who stole the American dream, they'll say. Well, Boeing just stole a chunk of it. And what I mean by that is that the American dream consists of a good salary, a steady job, health benefits, some kind of retirement benefit, the ability to buy your own home and help your kids do better than you do. Well, Boeing has just imposed a tremendous cut in the retirement benefits for tens of thousands of Boeing workers. That's taking away a chunk of the American dream. And at the same time, Boeing management and its board of directors voted a 50 percent increase in the stock for the company and a $10 billion buyback of the company's stock, and company executives get paid in stock. So they've added to the economic divide, this great inequality that everybody's talking about; Boeing just added to that. That's what I mean by larger implications for the middle class.

GREENE: And specifically, when we look at this, I mean when we talk about, you know, pensions that people used to rely on for the long term, now their, the burden is on them to put more money into the retirement. The burden is on workers to pay more for their health insurance. You're seeing this just taking its toll on a lot of people in the country.

SMITH: Absolutely. It's hard to believe today. But if you go back to 1980, 84 percent, five out of six of American workers who work for companies of more than 100 employees - certainly, Boeing and GE and GM, and - but lots of other middle-sized companies too, had a lifetime pension paid by their employer from the day they retired until the day they died every month they got a check. That kind of security on top of Social Security meant that people who had worked for 35, 40 years for a company all their lives could be secure in their retirement.

When we switched over to 401(k)s - as companies began to do in the late '80s and the '90s, then the 2000s and now, the burden was shifted from the company's books to the pocketbooks and the checkbooks of ordinary Americans, and it makes an enormous amount of difference.

GREENE: Hedrick Smith, you've raised a philosophical debate in your book and mentioned that there are some people in this country - George W. Bush was one of them - who talked about an ownership society. The idea that, you know, some people don't believe in so-called corporate welfare. They believe that people, families should be on their own, to, sort of, lift themselves up.

Aren't there people, maybe some who aren't that wealthy in the country who would vote on that very thing and say, you know what, I don't need a lot of benefits these days from a big corporation, I don't need help from the government, I want to do things on my own?

SMITH: Sure there are. But what was interesting is when that choice was first put to the machinists, who were pretty average people in Washington State, they voted two to one against this. It was only when their leadership really put pressure on them to come along with this deal and the governor said we're going to lose jobs. And, by the way, Boeing had also sweetened the kitty; they added $1 billion worth of restoring cutbacks that they had wanted to do. Yeah, there are people who would say that. But we've moved, David. This is a point, maybe, that should be underlined about Boeing.

We've moved from an idea of stakeholder capitalism, where the leaders of GM and Boeing and General Electric believed back in the '50s, '60s and '70s in sharing the wealth. That a prosperous American middle class helped the American economy and helped the country to a notion of capitalism where the idea is maximum return to shareholders, boost your dividend, buy back your stock at the same time you're cutting workers' pay and workers' benefits. I mean that's a very different motion. Both of those are American capitalism. One is the traditional style, the other is the new economy. And my argument in my book, "Who Stole the American Dream?" is it's hurt the economy, it's lowering the economy and it's really crippled the middle class.

GREENE: Hedrick Smith, thanks so much for coming in and talking to us. We appreciate the time.

SMITH: I appreciate your being interested.

GREENE: Hedrick Smith is a former New York Times Washington bureau chief and author of "Who Stole the American Dream?" You heard his voice on MORNING EDITION, from NPR News. Transcript provided by NPR, Copyright NPR.

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