In a discussion at Boeing-St. Louis headquarters with executives from 10 Missouri businesses, President Donald Trump on Wednesday extolled the benefits of the tax-cut bill he signed in December. The bill is contributing to a wave of good economic news for the nation.
It has mostly benefited Wall Street and doesn't seem to be doing much for workers' wages. Indeed, the Labor Department's February jobs report is overwhelmingly positive in terms of job numbers but shows wage growth of 0.1 percent. Wages are barely keeping up with inflation.
Despite full employment, no upward pressure on wages has materialized, dashing economists' expectations but calming the fears of Federal Reserve inflation hawks.
A Boeing facility was a strange choice as a venue for discussing jobs and the benefits of tax cuts. Boeing, led by its commercial airliner business, had a remarkable year in 2017. Share prices nearly doubled, but the company cut its workforce by 6 percent, or 9,700 workers.
Trump was touting a tax bill that cut the top corporate tax rate from 35 percent to 21 percent. But for 2017, Boeing paid an effective tax of only 13.3 percent on $9.6 billion in U.S. income. Over the past 10 years, average Boeing taxes were 8.4 percent.
Eager to curry favor with Trump, Boeing claimed it would be making new investments anyway -- but not in raises for its employees. It will split $300 million evenly among charitable giving, workforce development and spiffing up Boeing workplaces.
Unaffected by lower tax rates, Boeing isn't even passing out token $1,000 tax-bill bonuses, as other big companies are. Instead, it will spend more on items prudent companies spend money on anyway -- training and capital improvements.
Economists blame sluggish wage growth on a lot of factors, most of them related to the greater leverage companies enjoy over their workforce. The surprise now is how dramatically these factors have altered the equation between employment demand and wage growth.
Global competition and greater automation have eliminated a lot of U.S. jobs. The U.S. increasingly has become a service economy, and service jobs pay less than manufacturing jobs. A decline in union membership has added to employers' leverage.
Boeing is still a union shop in Missouri, but workers here gave up a lot in the last contract they signed. Software engineers and veteran machinists can still earn six figures, but new hires come in at lower pay. Assuming there's no trade war over Trump's tariffs on aluminum and steel, Boeing's jetliner business will continue booming, but the warplane business is dicey. Fortunately, Trump likes the F/A-18 Super Hornets made here.
To do something truly serious for wage-earners, Trump must restore some of the balance between the board room and the shop floor. Even though that's heresy to his party, it's why blue-collar voters elected him.
Commentary on 03/16/2018