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Is it about Right To Work? No, it’s about profit margins.

Boeing DreamlinerBoeing’s Dreamliner was in the news again last week:  one plane caught fire at Heathrow Airport; and a second experienced a “technical issue” and returned to its originating airport.

When I heard that news, I couldn’t help thinking about the announcement that gunmaker Sturm, Ruger would be opening a new factory in Mayodan, North Carolina, rather than expanding their facility here.  Don’t get the connection? Let me explain.

After Ruger’s announcement last week, the spinmeisters went into overdrive.  The way they spun things, this was a rejection of New Hampshire’s supposedly union-friendly atmosphere.  (Done laughing yet? The Granite State isn’t exactly a hotbed of union activity; only 12% of our workers are covered by a collective bargaining agreement.  West Virginia, Nevada and Montana all have higher “union density” rates.  Alaska and Hawaii, their union-representation rates are almost twice what it is here.  So you just gotta wonder about people who say New Hampshire is “friendly” to unions.)

By last Thursday, the spinmeisters – and the Union Leader – had twisted Ruger’s facility-siting decision into some sort of referendum on (so-called) Right to Work legislation.

Personally, I would guess that it was simply a case of Mayodan-area  government officials offering up enough “economic incentives” to lure the company there.  These days, lots of manufacturers choose factory sites based on which state is going to give them the most money.  And here’s what the Mayodan-area Business Journal is saying about all this:

Did someone jump the gun on the Ruger announcement by any chance?  Rockingham County and city of Mayodan officials were even told Tuesday to hold off on speaking with media outlets because the Connecticut-based gun maker (NYSE: RGR) apparently took issue with the wording of the notice and wanted to clarify that while the building is a preferred site, the expansion is still subject to the approval of an undisclosed amount of local and state incentives.

Did I miss something?  I didn’t see anything about “Right to Work” in that Mayodan story.  But RTW evangelists have a bad habit of taking a needle and building their own haystack around it.  They tend to stretch a single anecdote into “proof”, and hope that nobody looks too closely at what’s really going on. From “Indiana Company Rejects Gov. Mitch Daniels’ Claim That It Added Jobs Due To ‘Right-To-Work’ Law”:

Less than two months after he signed the [RTW] bill, Daniels is already touting its success. Daniels claims more than 30 companies have asked about moving to Indiana, but so far he’s only named one, MBC Group, that added Indiana jobs.  Unfortunately for Daniels, it seems he jumped the gun… company president Eric Holloway …says the law had no effect on his decision to expand.

The reality is, CEOs make factory-siting decisions based solely on their corporation’s bottom line.  Huge “economic incentives”? Cheap labor?  These are the things that drive corporate decision-making – not whether a particular state has written radical right-wing ideology into law.

Any CEO who based a siting decision on whether a particular state has a RTW law would probably soon be looking for other career opportunities.  Think about it: the employer decides whether or not to agree to fee-payer arrangements in a union contract.  If employers don’t want to have all their workers paying a fair share of collective bargaining costs… well, there lots of other things to bargain about (like, maybe, better health benefits; or job security).

Blake's Lotaburger - French friesNow, back to Boeing.  Here’s what the Seattle-area press was saying, years ago, when Boeing decided to build its Dreamliner in a new factory in Charleston, South Carolina:

Take away the heat, all the union-bashing or management second-guessing as Boeing now appears ready to move a major piece of its plane-building operations to South Carolina. At the core of this breakup drama is a cold statistic: 14.

As in $14. Per hour.  That’s the average pay of the local line workers who are building the fuselage of Boeing’s 787 Dreamliner in a Charleston, S.C., plant.

Average pay of a Boeing Machinist around here? $28 an hour.

…Boeing right now is paying less to build airplanes in South Carolina than we pay for cutting hair or shelving 3-pound jars of olives [at local Costco stores].

…it’s got to be shortsighted to build planes at near fast-food wages.

Yes, well… I personally am not planning to get on board a Dreamliner anytime soon.  Near fast-food wages, got to be shortsighted, indeed.

Still haven’t connected the dots, between Boeing and Ruger?  It’s that “cold, hard cash” thing.

Just like huge government-funded “economic incentives”, cheap labor enhances corporate profits.  Manufacturing wages are about 10% lower in North Carolina than here in the Granite State – and from Ruger’s perspective, that probably makes a significant difference in their expected profit-margin.

But as all of us consumers have learned through the years, cutting labor costs does not improve product quality.

T-SHIRTSFor those folks still buying T-shirts at Walmart: maybe quality doesn’t matter that much when you’re talking about T-shirts.

But airplanes?  When it comes to airplanes… product quality makes a difference. A huge difference.  Just ask any of the folks stuck at Heathrow Airport last week.

And it seems to me that guns are another one of those products where quality makes a huge difference.  I mean, it’s right there in Ruger’s corporate slogan: “Reliable Firearms”.

Ruger’s going to locate a new factory in a low-wage state.  What difference is that going to make in the quality of their product?

As astronaut Alan Shepard once said, “It’s a very sobering feeling to be up in space and realize that one’s safety factor was determined by the lowest bidder on a government contract.”

Seems to me that when folks are buying guns – or getting onto airplanes – they don’t want to be experiencing that same “sobering feeling”.

Maybe that’s just me.  But I’m getting really tired of spinmeisters and politicians who worship corporate profits above all else.

———-

Last word on Indiana’s RTW law and Governor Daniels’ hyperbole:

Indiana, of course, has tried “right-to-work” once before, passing a similar law in 1957. The law was so unpopular that voters demolished Republicans at the polls in 1958, and Democrats repealed it in 1965.

In One Chart: What Happened to the Middle Class

Andrew Smithers Chart

This chart, by British economist Andrew Smithers, shows how the nation’s income has been distributed since 1929.  “All output is for somebody’s benefit, either those who work for the firm (the labor share) or those who provide the capital (the profit share). Labor’s share has never been lower or the profit share higher.”

Smithers attributes this to changes in the way corporate executives are paid. “The current incentives discourage investment and encourage high profit margins. This is dangerous for companies’ long-term prospects… It is [also] very damaging for the economy… Senior management positions change frequently, so if management wish to get rich, they have to get rich quickly.”

Read the full PBS NewsHour interview here.

 

 

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