Since going on strike last month, Boeing (BA) factory workers have repeated one theme from their picket lines: They want their pensions back.
Boeing froze its traditional pension plan as part of concessions that union members narrowly voted to make a decade ago in exchange for keeping production of the company’s airline planes in the Seattle area.
Like other large employers, the aerospace giant argued back then that ballooning pension payments threatened Boeing’s long-term financial stability. But the decision nonetheless has come back to have fiscal repercussions for the company.
The International Association of Machinists and Aerospace Workers announced Wednesday night that 64% of its Boeing members voted to reject the company’s latest contract offer and remain on strike. The offer included a 35% increase in wage rates over four years for 33,000 striking machinists but no restoration of pension benefits.
The extension of the six-week-old strike plunges Boeing — which is already deeply in debt and lost another $6.2 billion in the third quarter — into more financial danger. The walkout has stopped production of the company’s 737, 767 and 777 jetliners, cutting off a key source of cash that Boeing receives when it delivers new planes.
The company indicated Thursday, however, that bringing pensions back remained a non-starter in future negotiations. Union members were just as adamant.
“I feel sorry for the young people,” Charles Fromong, a tool-repair technician who has spent 38 years at Boeing, said at a Seattle union hall after the vote. “I’ve spent my life here, and I’m getting ready to go, but they deserve a pension, and I deserve an increase.”
What are traditional pensions?
Pensions are plans in which retirees get a set amount of money each month for the rest of their lives. The payments are typically based on a worker’s years of service and former salary.
Over the past several decades, however, traditional pensions have been replaced in most workplaces by retirement-savings accounts such as 401(k) plans. Rather than a guaranteed monthly income stream in retirement, workers invest money that they and the company contribute.
In theory, investments such as stocks and bonds will grow in value over the workers’ careers and give them enough savings for retirement. However, the value of the accounts can vary based on the performance of financial markets and each employee’s investments.
Why did employers move away from pensions?
The shift began after 401(k) plans became available in the 1980s. With the stock market performing well over the next two decades, “people thought they were brilliant investors,” said Alicia Munnell, director of the Center for Retirement Research at Boston College. After the bursting of the dot-com bubble in the early 2000s took a toll on pension plan investments, employers “started freezing their plans and shutting them down,” she added.
