NORTH CHARLESTON – It’s shortly after 3:30 on an unseasonably warm Dec. 3 afternoon and first-shift quitting time for hundreds of employees at an existing Boeing manufacturing plant here. Just a couple of miles away, a handful of men who make a living at the plant have repaired to a watering hole off International Boulevard.
The smell of cigarette smoke and the dullness of an ordinary afternoon hangs heavy in the place – Centre Pointe Bar & Grill, a sports bar with Wi-Fi and big-screen high-def TVs.
It’s Miller time.
But the men have not come here to throw back a cold one or two – or three. That much is plain to see in their drinks of choice – sodas and sweet tea across the board.
No, the guys are taking time out of their evening to talk with The Nerve about their livelihoods. Big developments are afoot where they work to put food on their tables and keep a roof over their heads. Adjacent to Boeing’s existing plant, and another one the company operates next door, the aerospace powerhouse is building a gigantic new factory.
The work is coming along at a brisk pace. When finished, expected to be sometime in 2011, the facility is slated to be an assembly line for Boeing’s next-generation passenger airplane, the 787 Dreamliner.
From now until then and points beyond, the promise of hundreds and even thousands of new, good-paying jobs reverberates across the construction site like an economic sonic boom.
The powers that be in the General Assembly championed the plant as precisely that kind of boon to the state when they rushed an incentives package through the Legislature last fall in a bid to buy the assembly line for South Carolina.
Senate President Pro Tempore Glenn McConnell, Senate Finance Committee Chairman Hugh Leatherman and House Speaker Bobby Harrell talked of the plant generating thousands of new jobs and hundreds of millions of dollars in capital investment.
In a statement defending the incentives package, McConnell and Leatherman said “it seems obvious that the great majority of the jobs created will go to people who already reside in our state.”
The two Senate leaders also talked up a “multiplier effect”: “We can expect that for every job created at Boeing, two or three other jobs will be created,” they said in their statement.
It was then and is now a powerful, politically potent message, amid the Great Recession and an unemployment rate in South Carolina among the highest in the nation.
Realistically, however, there is no reliable way to quantify such a multiplier effect.
Moreover, what the politicians did not call attention to are the equally immeasurable opportunity costs of the incentives. Those can be understood one way with an unanswerable question: How many jobs could existing businesses in the state create if their taxes were cut by an amount equal to the breaks for Boeing?
Lawmakers inked the Boeing incentives deal during a two-day special legislative session in October. Touted as the largest economic development project in South Carolina history, the incentives consist of state bonds and tax breaks valued by some unofficial accounts at as much as $450 million or more.
The giveaways courtesy of the Legislature on behalf of South Carolina taxpayers and businesses are tied to Boeing creating 3,800 full-time jobs and investing at least $750 million at the new plant.
Nevertheless, there is nothing in the law actually requiring the company to meet those thresholds before it begins utilizing the incentives, nor ensuring that Boeing has done so when it’s all said and done.
The legislation does contain what’s known in the economic development incentives game as a “claw-back” provision. Such a mechanism involves a government recouping subsidies from a company that fails to fulfill its part of an incentives agreement.
But if that were to be the case with Boeing, the statute says only that the S.C. Department of Revenue “may assess” any taxes due if the company does not adhere to the job creation and investment requirements. The law does not say the department “shall,” “will” or “must” assess taxes due in such a scenario.
In addition, because state law shrouds the dollar amounts of tax breaks a company claims as proprietary information, it is virtually impossible to conduct a true, final cost-benefit analysis of an incentives deal.
As it follows, looking to Boeing’s existing work force proves instructive with respect to potential pitfalls of those loopholes, as well as the pronouncements the legislative powers that be made so proudly about their deal with the company.
According to the workers who spoke with The Nerve, the Boeing payroll is roughly a 50-50 split between Charleston-area residents and out-of-state contractors.
The say the contractors come from all over the country: Florida, Texas, Kansas, Michigan, New Mexico, California.
Others are foreign nationals, mostly from Spanish-speaking countries: Brazil, Argentina, Colombia, Venezuela, Peru, Mexico.
“I’d say at least two-thirds of our contractors are Hispanic,” says Jay Fleckenstein, a frame installer who has worked at the plant for about a year-and-a-half.
A Boeing employee who was a high-ranking official in a former union at the plant confirms the men’s account of contractors from other parts of the United States.
That employee and some of the workers gathered here today spoke with The Nerve only on condition of anonymity.
They want to remain nameless for fear of repercussions. Among other sources of blowback, the union – the International Association of Machinists and Aerospace Workers Local 787 – is a sore subject for many Boeing employees.
In a contentious split among its members, the union was disbanded several months ago.
No one disputes Boeing’s right to hire whomever it wants. Nor is anyone arguing the company should be forced to. And in fairness, Boeing has owned the factory the men and the former union official work at only since last summer. Vought Aircraft Industries opened it in June 2006 and operated the plant until Boeing purchased it.
Boeing bought a one-half share of the adjacent facility in 2008 and the rest of it last year. Vought and Alenia Aeronautica of Italy built that factory under a partnership named Global Aeronautica.
The plants manufacture and assemble aft fuselage sections of the 787.
The men and the former union official say Boeing management plans to significantly ramp up its hiring of locals, referred to as “directs” in plant parlance, beginning this month.
It only makes sense, they say, explaining that local workers are more tied to and vested in the community, and therefore their jobs, than contractors, whom the guys describe as hired guns who pursue the best money they can get, wherever they can get it.
“They’re the gypsies of the trade,” one of the men says.
“They go to the highest bidder,” another adds.
Additionally, Boeing is hardly alone in outsourcing some of the workload at the plant. The men say contractors were prevalent at the site under Vought as well, their ratio of the work force varying from about one-third to two-thirds.
As evidence of Boeing’s commitment to hiring local, the men point to a full-court press the company is putting on training up future employees at the local Trident Technical College. The tutoring is taking place through the state’s readySC program.
“They’re training 24 hours a day over at the college,” one of the men says.
It’s as much a necessity as anything. After all, they say, you can’t just pluck several thousand people off the street – or the unemployment line – and throw them into jobs at an aerospace manufacturing plant churning out passenger jets of the future.
Especially in South Carolina, what with its well-documented public education shortcomings.
“We’re going to be in this boat until it catches up with the rest of the world,” Charleston native Gary Lewis says of the state’s K-12 schooling, “and that bothers me.”
Lewis has worked for Boeing in North Charleston since April 2008. Wearing an olive green Boeing T-shirt and a blue Vought Aircraft Industries jacket, he sounds an optimistic note as he shares his thoughts about job creation at the new facility as it relates to the incentives package.
“I think eventually Boeing will meet that 3,800,” Lewis says. It will take longer, though, than the politicians say, he adds.
Perhaps, but there are no guarantees that the job-creation benchmark will be met, nor that it will be achieved with mostly South Carolinians. And while Boeing is paying the trainees for their time, the infrastructure to provide that work-force development amounts to yet another public cost of the deal – and an unknown one.
Reach Ward at (803) 779-5022, ext. 117, or eric@scpolicycouncil.com.