Machinists testify on wage standards for tax breaks
OLYMPIA – Paul Elliot works at the Boeing Co. now, but before he landed that job, he worked for an aerospace parts supplier in Kent, where he was paid $9.50 an hour to make parts for Boeing, Lockheed Martin and other aerospace giants.
He was one of the lucky ones, he told members of the Washington state House of Representatives Committee on Labor and Workforce Development. He got picked for training that led to promotions that led to raises that lifted him out of abject poverty.
Even so, Elliot told the legislators, “I had to live with my parents. I couldn’t afford a house.”
Yet the co-workers who didn’t get the raises continued to toil for just above minimum wage, Elliot said. The company’s health insurance was so expensive, many decided they were better off enrolling in the taxpayer-subsidized basic health plan that’s offered to low-income people. Some of those who stuck with the company plan ended up in bankruptcy, because when their wives got pregnant, they couldn’t pay the deductibles and premiums with their $12-an-hour paychecks.
Yet while his co-workers were struggling to pay for their families’ most-basic needs, their employer was collecting a share of what has grown to become the nation’s largest corporate tax-give-away, Washington’s state’s $8.7 billion aerospace tax incentive package.
“I believed that incentives were supposed to create middle-class jobs,” Elliot told the legislators. “But they used the tax incentives to increase their profits while continuing to pay their workers low wages.”
Washington taxpayers are paying twice for aerospace supplier jobs, Holden told the legislative panel — with tax breaks that directly go to the companies’ bottom lines, and by paying for welfare programs that provide the working poor with food and shelter that they can’t afford with their tiny paychecks.
“Too many employers are paying the majority of their employees less than $15 an hour,” Holden said. “They’re stuck having to use the social safety net, and work 50 to 60 hours a week to survive.”
Elliot and Holden appeared before the House Labor Committee on Feb. 9 to testify in support of House Bill 1789, which would establish a wage standard for aerospace companies that get preferential treatment on their state taxes.
IAM 751 and SPEEA would like to see that standard set at $19.67 an hour, which is the current median wage for working people in Washington state – meaning that half of the people drawing paychecks in our state are paid more than that and half are paid less.
Aerospace companies would have the option of meeting the wage standard and keeping the tax breaks, or continuing to pay their workers poverty wages while their state taxes reverted to the state’s basic rate for manufacturing companies that aren’t in aerospace.
Any additional tax revenue that the state collects from aerospace companies that opt to continue paying poverty wages would be funneled to programs that provide food, shelter and medical assistance to the state’s working poor, under the bill.
The change would be good for Washington taxpayers, said IAM 751 Legislative Director Larry Brown.
“The way the tax incentives are structured now, Washington state citizens are paying a premium to create jobs with below-average pay,” Brown said after the meeting. “We think our state’s citizens deserve a better return on their $8.7 billion investment.”
Other states do get those kinds of returns on their tax incentive investments, said Thomas Cafcas, a research analyst with Good Jobs First, a non-partisan research center.
Cafcas told the House Labor Committee that he was involved in a study that evaluated 238 state-sponsored business incentive programs in 42 states. Of those, 98 industry incentive programs imposed wage requirements. States like South Carolina, Missouri and Kansas – each of them home to major Boeing facilities – all have wage requirements in return for aerospace tax incentives, he said.
Missouri, for example, recently passed legislation that requires Boeing to create new jobs that would pay more than $60,800 a year, in order to qualify for the state aid. South Carolina requires Boeing to pay wages based on the average wage in the county where it operates, and also to provide health insurance.
It’s important for states to set these kinds of standards in order to prevent “hidden taxpayer costs,” Cafcas told the Labor Committee. “These costs occur when subsidized jobs pay poorly or lack basic healthcare. As a result, employees have to rely on public assistance programs like Medicaid, housing assistance, energy assistance and food stamps.”
Cafcas told the committee that the wage bill makes sense. “Standards like those set in HB 1786 are commonly used on major economic development deals around the country.”
SPEEA Legislative Director Chelsea Orvella told the committee that roughly one third of the non-Boeing aerospace production workers in Washington state are locked into jobs paying less than $15 an hour.
“Our state invests heavily in the aerospace industry,” she said. “It’s a vital tool for our success here in Washington, but thousands of workers are not sharing in that success.”
That’s why SPEEA supports wage standards, Orvella said. The standards would encourage companies to pay “a living wage in aerospace, and in turn workers, could support the businesses in their communities.”
Without the standards, “we leave thousands of workers behind,” she said.
Do you support aerospace tax incentive accountability? Click here to let your legislators know that you do — and expect them to do so as well.