The President’s Pen is a weekly blog written by Jonathan Smith, New Vision’s President and CEO about local economic development projects and initiatives. It also covers economic trends, workforce issues, business climate policies, and manufacturing news.
Most of us in Washington state are thanking the Machinists for their recent vote to support a new long term contract with Boeing. There was palpable relief when the ballots were counted and it became apparent that Boeing will build its next generation 777X in Washington State. An earlier contract rejection on the part of the Machinists triggered the biggest industrial recruitment sweepstakes since auto plants started building new mega facilities in the South and Midwest. Twenty two states pitched their sites, incentives, and business climate attributes to the aerospace company but in the end the availability of a skilled labor force seemed paramount to Boeing.
The Boeing site selection lottery illuminates the competitive nature wooing corporate investment projects. It also sheds light on which criteria are most important to Boeing and other firms when they are going through the site selection process. According to Area Development Magazine companies ultimately need a spot to land, but there are often more important factors they weigh when determining where to build new factories. The magazine has surveyed corporate executives every year for the last 27 years and has an outstanding sense of site selection factors and how they have changed over time. Based on the magazine's most recent poll, corporate executives still think labor costs and highway accessibility are the most important site selection factors. The availability of skilled labor jumped way up the list to third position. The availability of advanced telecom infrastructure also jumped up the list to position four. As you can see from the magazine's table to the right, energy costs, tax rates and exemptions, and real estate factors are also important.
The drama that played out between the Machinists and Boeing showed the interplay between top labor force factors. Corporate executives are at once consumed with the cost of labor and the availability of skilled personnel. Boeing learned from the delays and challenges it faced when it outsourced 787 production - it could not easily repeat these mistakes with the 777X. Getting this new plane into production put a premium on skilled labor availability and there are few if any other areas in the country (or world) that could match Washington's aerospace workforce. At the same time though Boeing also needed to gain predictability and control over its labor costs. The Machinist contract ultimately offered a sizeable upfront bonus in return for concessions on retirement benefits.
We are thankful that Boeing is going to build its next generation airplanes in Washington state. Thanks go to the Machinists for making this deal happen. We also appreciate the Governor's and Legislature's efforts to keep Boeing anchored in Washington.
Aerospace is one of Yakima County's key industries. Learn about the region's other key industries.