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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

April 22, 2009 at 10:13 AM

Is Boeing looking for the exit?

Top of the News: The Economic Development Council of Snohomish County was due to hold a breakfast meeting today to discuss Boeing’s future. Among the speakers was Scott Hamilton, managing director of the consulting group Leeham Co. With Boeing laying off thousands amid the economic downturn, county and state leaders are understandably nervous about where this will leave aerospace in the Puget Sound region. Hamilton predicts Boeing could leave by 2020 without radical changes in the policy and labor arenas.

One report from the Washington Alliance for a Competitive Economy imagines what would happen if Boeing left. With each Boeing job supporting more than three other jobs, the scenario would cost the state 285,000 jobs. It discusses the “location is a choice” meme of Boeing Commercial Airplanes boss Scott Carson, and how Washington faces numerous lower-cost competitors now. “Our state’s economic recovery depends on our ability to retain our premier industries. As this report demonstrates, The Boeing Company plays an

extraordinary role in the Washington economy. Its contributions are irreplaceable. Nothing on the horizon promises the positive economic impact of a retained aerospace cluster,” the report says. It recommends, among other things, changing workers comp to lower employer costs and creating “a sustainable budget that preserves essential public services without raising taxes.”

A caveat: The scenarios in the report were prepared by the Washington Research Council, an anti-tax, business-oriented advocacy group. WACE is a business lobbying group.

Another report out is from Deloitte Consulting, which states flatly, “Washington is not keeping its competitive edge in attracting and retaining the commercial aircraft industry.” It cites increasing cost pressures on airlines, that Washington has not been a player in recent site selections for aerospace companies and that wage rates and cost of living here are competitive disadvantages.

Again, a caveat: Deloitte has a long history of work for Boeing, and was instrumental in helping Boeing land a big tax break during Gov. Gary Locke’s administration. Gov. Chris Gregoire, creating an aerospace council, cited information from…Deloitte.

Obviously these reports are aimed at pressuring lawmakers. And they make some valid points. But are they objective assessments? I’m a skeptic. Washington has relatively low taxes, and Boeing already has a big break. Some studies cite statistics showing that the state is not all that expensive in terms of costs. Washington’s unemployment compensation system is currently the envy of the nation. And “competitor” South Carolina now has the highest unemployment in the nation. The vaunted multiplier effect of Boeing jobs comes precisely because these highly skilled workers are well paid.

As I’ve written before, the burden of competitiveness can’t all fall on the working stiffs. If cheaper labor, less of an unemployment safety net for workers and a Mississippi-style tax base are the only way to compete, Washington and America have bigger problems than losing Boeing. There’s also a quiet, growing backlash. I was speaking at an event last week, when an audience member asked, “When are we going to call Boeing’s bluff?” This, after all, is a company that ditched us for Chicago, hardly a low-cost, low-wage or low-regulation town. They didn’t go to Biloxi.

Today’s Econ Haiku:

They’re crying Yahoo!

On Microsoft deal rumors

And MS gets what?

Comments | More in Aerospace/Boeing

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