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America’s “Race to the Bottom”: Boeing is still outsourcing

Boeing DreamlinerYesterday, the Boeing Company announced it would “create engineering centers for future work in South Carolina and possibly in Kiev, Ukraine.”

The perspective from Seattle, Washington:

The engineering union here — the Society of Professional Engineering Employees in Aerospace (SPEEA), which represents nearly 26,400 engineers and technical staff — has long decried Boeing’s outsourcing of engineering work to its design center in Moscow.

Boeing internal documents obtained by The Seattle Times in 2004 after the Moscow center was set up show the company could employ high-quality Russian engineers there at ‘approximately 1/3 to 1/5 of the U.S. cost.’

Remember, this is the Boeing Company – manufacturer of the problem-plagued Dreamliner 787. Read “Boeing Learns the Hard Way that Outsourcing Hurts in the Long Run” here.

Most of us would think that “lessons learned the hard way” would maybe change a corporation’s modus operandi.

Most of us would think that maintaining – or restoring? – a reputation for quality workmanship would be particularly important to an airplane manufacturer.

But right now, the American economy is caught in a race to the bottom. These days, CEOs aren’t interested in long-term corporate reputations. They’re interested in profits. And Boeing’s executives have been producing good profits – despite the Dreamliner mess, and despite lower sales.

How? They’ve been so very, very proficient at “controlling costs” – costs such as engineering and skilled manufacturing labor. Read “Boeing profit beats estimates despite 787 problems” here.

And Boeing has rewarded its executives handsomely for their ability to “control costs”. Last year, “key executive” compensation was up almost 55%. And the guy at the top? CEO Jim McNerney received almost $27.5 million. One person. One year. Almost $27.5 million.

(And that doesn’t even include what McNerney receives in Boeing corporate dividends. According to SEC filings, McNerney owns a few hundred thousand shares of Boeing stock, mostly received as part of his executive compensation. That means McNerney receives almost another quarter-million dollars, every time Boeing issues quarterly dividends. And guess what? Those dividends are taxed at a much lower rate than ordinary wages and salaries.)

So yes, America’s economy is still racing toward the bottom. Boeing is hiring engineers at 20 cents on the dollar — and planning even more outsourcing.

How much lower can we go?

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More on McNerney’s dividends:

Not that long ago, dividends were taxed as ordinary income. It didn’t matter whether someone’s income came from wages or stock holdings, it was still taxed the same.

One of the many “Bush tax cuts” changed that – and now, stock dividends are taxed at roughly half the rate as CEOs’ salaries.

This morning, I finally added it all up. According to Congress’ Joint Committee on Taxation, over the past decade the “reduced rates of tax on dividends and long-term capital gains” have cost the federal government more than a trillion dollars in revenue ($1,020 billion, since FY2004).

That means almost 6% of the country’s total federal debt is directly attributable to this bizarre tax preference for unearned income.

Now that the stock market is booming, the impact is even greater: expect another $1.3 trillion loss of federal revenue over the next 10 years. And according to the Congressional Budget Office, the top 1% of taxpayers receive almost 70% of the benefit of this tax preference for unearned income.

The rest of us in the 99% get…?

 

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About Liz Iacobucci

Liz Iacobucci is the former Public Information Officer for the State Employees’ Association of New Hampshire, SEIU Local 1984. Over the past three decades, she has served in government at the federal, state and municipal levels; and she has worked for both Democratic and Republican politicians.
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