Should a federal government agency dictate where a business can and cannot produce goods and services in the U.S.? Of course not. Right?
Well, as crazy as it might sound, that’s what the National Labor Relations Board (NLRB) is doing to a leading manufacturer.
Doing the bidding of the International Association of Machinists and Aerospace Workers (IAM) labor union, the NLRB’s acting general counsel in an April 20 complaint sought an order requiring Boeing to shift its second line of 787 Dreamliner aircraft assembly production away from a brand spanking new plant in South Carolina to the state of Washington.
Keep in mind that Boeing has made a massive investment to manufacture these airplanes in the good old U.S. of A., while other businesses have found it competitively advantageous to move manufacturing to other nations. In a recent opinion piece for The Wall Street Journal, Jim McNerney, Boeing’s chairman, president and CEO, explained that the firm invested more than $1 billion in its South Carolina jetliner assembly plant, “the first one built in the U.S. in 40 years,” and a thousand workers have been hired to build planes starting in July.
Shouldn’t the Obama administration be lauding such action? Especially in this tough economy, the President should be in South Carolina making speeches and cutting ribbons before cheering workers with new jobs. Instead, though, the four-member NLRB, led by three Democrats — two appointed by President Obama, and the third appointed by President Clinton and later promoted to NLRB chairman by Obama — is punishing Boeing’s investment in U.S. manufacturing.
The NLRB complaint effectively says that building planes in South Carolina means that Boeing “has engaged in unfair labor practices” against the firm’s unionized workers in Washington. How so? Well, the NLRB references a memo and a few media quotes from executives noting that the company has to reduce vulnerability to production and delivery disruptions due to work stoppages. The IAM went on strike in 1977, 1989, 1995, 2005, and 2008.
It’s important to point out that no union jobs are being cut by Boeing in Washington. In fact, McNerney noted that since the investment was made in South Carolina, Boeing also has added 2,000 union jobs in Washington. Boeing’s plan is to build 70 percent of the Dreamliners in Everett, Washington, with 30 percent produced in the North Charleston, South Carolina, facility.
If this action by the NLRB seems even more bewildering and goofy, understand that the driving force behind this complaint is that labor union leaders and their political sympathizers despise and fear right-to-work states. In 22 right-to-work states, workers cannot be forced to join a union, nor can they be compelled to pay dues to labor unions. In contrast, the other 28 states have compulsory union membership for workers if a union has a contract with the employer.
As neatly summed up in a report released in May by the office of U.S. Senator Jim DeMint (R-SC), the rate of private sector job growth in right-to-work states was about double the rate in compulsory-union states from 1993 to 2009; and the growth in private sector business establishments was 46 percent faster in right-to-work states over this same period. Individual income also grew at a faster rate in right-to-work states.
Quite simply, arcane, inflexible, intrusive work rules and reduced productivity make union workplaces less dynamic and less innovative, and heavily unionized states more costly and less competitive. Unions experiencing a long and dramatic decline in private-sector membership are extremely worried.
Obviously, South Carolina is a right-to-work state, while Washington is not. It’s also worth noting that even given Washington’s tremendous competitive advantage due to a lack of any personal or corporate income taxes, the labor union factor still comes into play for many firms.
And contrary to the assertions being made by the NLRB, Boeing has done nothing wrong. It is a company that operates in right-to-work and non-right-to-work states, with non-union and union employees, and makes investment decisions based on what’s best for the firm, with the results being beneficial to the U.S. economy.
Instead, based on the law and previous Supreme Court decisions, it is the NLRB clearly in the wrong and overreaching in this case. A hearing is set for June 14 before Administrative Law Judge of the NLRB. The next stop would be the four-member board, and then to the courts for appeals. That, of course, would be a dangerous and costly journey.
If the NLRB moves ahead and is ultimately supported by activist courts, the consequences would include reduced investment and job creation at home, and enhanced incentives to shift investment and production to other nations.
Some in Congress see the need for action. On May 12, U.S. Senators DeMint, Lindsey Graham (R-SC), and Lamar Alexander (R-TN) introduced the Job Protection Act (S. 964). It would clarify that the NLRB cannot order a business to relocate jobs; that a firm has the right to decide where to do business; and that an employer’s free speech regarding the costs of a unionized workforce are fully protected.
It’s outrageous that such legislation is even needed, but these apparently are outrageous times in which we live, work and try to do business.
Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council, can be reached at email@example.com. His new book is titled Warrior Monk: A Pastor Stephen Grant Novel.