Commentary | Wages, Incomes, and Wealth

Boeing’s Prospective Layoffs—Viewpoints

Opinion pieces and speeches by EPI staff and associates.


Boeing’s Prospective Layoffs

by Ann Markusen and Laura Powers

Boeing’s recently announced plans to lay off thousands workers over the next couple of years is bad news for St. Louis. Those displaced are unlikely to find comparable jobs, and other civic sectors are unlikely to pick up the slack.

This is the latest chapter in the massive global military industrial downsizing process. Over 1.4 million American defense workers have been displaced in the 1990s as world and domestic military spending fell by more than a third.

What happened to these workers? The majority of workers displaced from defense-related industries between 1987 and 1997 now work at jobs that pay less than their former wages and require substantially different skills. A sizable minority experienced a drop in earnings of 50% or more. This group ought to have done relatively well, given their considerable experience, President Clinton’s explicit commitment to facilitate defense worker transition, a successful overhaul of worker adjustment programs at the Department of Labor, and a robust national economy.

Why the poor results? Aggressive Pentagon initiatives to encourage defense mergers, subsidize arms exports, and reward contractors for layoffs undercut the potential for firms to use defense worker skills in commercialization projects. These policies treated workers as impediments to cheaper weapons production and encouraged contractors to remain defense-specialized, using
their cash reserves to acquire other contractors – like Boeing’s takeover of McDonnell Douglas – rather than invest in related civilian fields. As a result, worker retrenchment exceeded the depth of contract cutbacks while defense profits remained surprisingly high. Arms exports did not help fill the job gap, because offset agreements with foreign governments relocated much of the associated work overseas.

Nor could workers rely on displaced worker programs for transition to satisfactory job and career changes. A number of federal programs – including experimental worker adjustment and skills upgrading programs funded through the Department of Labor, business revitalization efforts funded by the Department of Commerce, and public R&D and procurement schemes for new missions like intelligent highways – did produce positive results for some clusters of workers. But the success of these strategies is highly dependent on the capacity of state and local governments to design and deliver good programs.

St. Louis did mount innovative economic development and job retention programs, thanks to an unlikely coalition of peace activists, public sector economic developers and local business people. As a result, defense workers in St. Louis were better off than those in places like Los Angeles, which had no prior experience with large-scale layoffs.

But although the range of services available to displaced manufacturing workers improved significantly over the decade, there is still no meaningful income support beyond the customary 26 weeks of unemployment insurance for people who want to seriously retrain or re-educate. Strict limits on counseling make it difficult for workers to assess their existing technical capacities and identify occupations that build on them. Instead, they are channeled towards immediately available work, generally in service sector jobs for which they are over-qualified and which pay poorly. Only a minority of St. Louis workers benefited from the more innovative programs in the region.

There is no reason to believe that the next group displaced will fare better. The experience of the 1990s demonstrates that the American workforce development system cannot yet move structurally displaced workers quickly from one set of obsolete activities to other productive ones. The system is underfunded, hampered by a continued focus on disadvantaged,
hard-to-employ workers, and, as a rule, disconnected from economic development efforts. It remains minimalist, even though recent demonstration projects and the historic GI bill confirm that preventive and educational strategies can make a major difference.

St. Louis can cope with this next round of layoffs, especially if the economy remains strong. But the history of large layoffs in steel, autos and aerospace over the past two decades show that host economies often experience negative growth for a period of five or more years and lag the nation for even longer. And the disappearance of good jobs like those at Boeing exacerbates the deterioration in the income distribution, in which blue-collar men suffer the greatest relative declines.

St. Louis continues to have a stake in better-funded national worker adjustment programs and technology development programs that take novel approaches in moving displaced defense workers into environmental, transportation, communications, and associated fields of expertise. Without such programs, the transition would be rough.

Laura Powers and Ann Markusen teach at Rutgers University in New Jersey and are authors of “A Just Transition? Lessons from Defense Workers’ Experience in the 1990s”, published by the Economic Policy Institute.