Since the 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 for made ten years ago in exchange for maintaining production of the company’s aircraft in the Seattle area.
Like other major employers, the aerospace giant argued at the time that rising pension benefits threatened Boeing’s long-term financial stability. But the decision came back anyway tax consequences for the company.
The International Association of Machinists and Aerospace Workers announced Wednesday evening that 64% of its Boeing members are members voted to reject the company’s latest contract offer and remain on strike. The offer included a 35% pay increase over four years for 33,000 striking train drivers, but no restoration of pension benefits.
The extension of the six-week strike plummets Boeing – which is already deeply in debt and lost another $6.2 billion in the third quarter – is finding itself in even more financial peril. The strike has halted production of the company’s 737, 767 and 777 jets, cutting off a key source of cash that Boeing receives when it delivers new planes.
However, the company indicated on Thursday that reducing pensions remains a non-starter in future negotiations. Union members were equally adamant.
“I feel sorry for the young people,” Charles Fromong, a tool repair technician who worked at Boeing for 38 years, said after the vote in a Seattle union hall. “I’ve spent my whole life here and I’m preparing to leave, but they deserve a pension, and I deserve a raise.”
What are traditional pensions?
Pensions are plans in which retirees receive a fixed amount every month for the rest of their lives. Payments are generally based on an employee’s years of service and previous salary.
However, in recent decades, traditional pensions have been replaced in most workplaces by retirement savings accounts such as 401(k) plans. Instead of a guaranteed monthly income stream after retirement, employees invest money that they and the company contribute.
In theory, investments such as stocks and bonds will increase in value over employees’ careers and provide them with sufficient savings for retirement. However, the value of the accounts may vary depending on the performance of the financial markets and the investments of each employee.
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,” says Alicia Munnell, director of the Center for Retirement Research at Boston College. After the bursting of the dot-com bubble took its toll on pension fund investments in the early 2000s, employers “began to freeze and shut down their plans,” she added.