Low pay persists at companies receiving tax breaks

March 29, 2015

By Dominic Gates, March 29, 2015

Corrine "Cookie" Peterson, a 72-year-old widow, arrives at AIM Aerospace's manufacturing plant in Sumner at 6:30 a.m. to assemble ventilation ducts for Boeing jets.

Arthritis restricts her to a 40-hour week, with no overtime. Some days, she comes home with hands orange from chemicals, her eyes itchy from the fiberglass.

After seven years, she's worked her way up from a starting wage of $10 an hour to $13.30.

Peterson supports the 17-year-old grandson who lives with her in Bonney Lake thanks to her monthly Social Security check for about $1,000.

"That's my house payment," says Peterson. "I mainly work for my utilities and food and to keep him in clothes. I've gone to the food bank quite a few times."

Peterson's low wages are not exceptional.

In 2013, outside of Boeing, a third of production workers at local aerospace parts manufacturers – companies that get tax breaks intended to preserve good jobs in the state – earned between $10 and $15 an hour, a Seattle Times analysis of state data shows.

AIM's filing to the state shows that three quarters of the 314 production workers at its Sumner plant at the end of 2013 earned $15 an hour or less.

Two thirds of the production workers at AIM's Auburn and Renton manufacturing plants fell in the same low-wage category.

Boeing is the jewel in the crown of Washington's world-renowned aerospace cluster, paying well and still, despite recent erosion, providing enviable benefits to its 80,000 employees here.

But at the hundreds of local aerospace companies, most of them suppliers feeding parts to the jet maker and also taking the state tax breaks, it's a different story.

More than 30,000 people work locally at such companies, including airplane repair shops and engineering firms. While the nearly 4,500 engineers they employ are paid well, often earning more than $30 an hour, more than 5,300 production manufacturing workers earn no more than $15 an hour.

Entry-level wages in this sector are typically $10 to $12 an hour, according to workers.

Seattle's new minimum wage law has established $15 an hour – equivalent to $31,200 a year without overtime – as the basic threshold for the lowest-paid workers in any field by 2017.

Even the top of that range is close to a poverty wage: A married couple with two small children earning $31,000 a year qualifies for federal food stamps.

Greg LeRoy, executive director of Good Jobs First, a Washington, D.C.-based nonprofit that studies state job-creating incentives, said that if state government gives tax breaks to corporations for jobs that pay so little the workers are forced to rely on food banks and social services, "that's a perverse outcome of economic development spending."

Legislators in Olympia passed the aerospace tax breaks in 2003 and extended them last year. Aerospace companies get a 40 percent reduction in the tax on corporate revenue, with the stated intention "to provide jobs with good wages and benefits."

Instead, low wages persist in the sector. That spurred a bill in Olympia this year, supported by the labor unions at Boeing, that would set a minimum wage at companies taking the tax breaks.

The bill would require such companies to pay employees who've been on the job more than three years a minimum hourly wage of $15.74 next year, and at least the state median wage by 2018. That median is now $19.67 an hour.

The bill is opposed by aerospace companies and is currently stalled in the Legislature.

State Rep. Reuven Carlyle, D-Seattle, chair of the House Finance Committee, said the bill represents "a legitimate and reasonable and fair public policy" but lacks broad bipartisan support and so is "a heavy lift to pass."

One factor executives at suppliers cite repeatedly for the surprisingly low pay in aerospace manufacturing is the constant pressure from Boeing to reduce the costs of its parts.

Several said the jetmaking giant – which, based on revenue generated in the state, must itself save well over $100 million annually from the tax breaks – simply wouldn't accept the price increases that would result from suppliers paying higher wages.

J.C. Hall, director of sales at Hytek Finishes in Kent and chairman of the Pacific Northwest Aerospace Alliance (PNAA), a trade group of local suppliers, said passing higher wage costs up the line "would encourage Boeing to take the work elsewhere."

One of the better-paying aerospace firms is Aviation Technical Services (ATS), the aircraft maintenance and repair firm that local management acquired from Australian investment bank Macquarie Group in a 2013 buyout.

The used jets ATS rolls out for airline service must meet Federal Aviation Administration (FAA) safety standards, just like new Boeing jets.

"There's always cost pressure," said Gabe Doleac, ATS' senior vice president of strategy, "but neither ATS nor our customers put cost ahead of quality and safety."

As a supplier to the airlines, not to Boeing, ATS escapes the Boeing cost squeeze. Indeed, its wages are pushed up by competition from Boeing in the hiring of mechanics.

ATS today employs about 1,100 people in Everett and another 50 or more at its new facility in Moses Lake.

According to state wage data, more than two-thirds of ATS' 556 repair mechanics in 2013 earned above $20 an hour, and only 67 earned $15 or less.

Nevertheless, in February Doleac testified in Olympia against the proposed minimum wage for aerospace companies, arguing that it would make ATS uncompetitive in the global aircraft maintenance market.

If the bill became law, Doleac said, "we would have to opt out of the aerospace tax incentives – incentives that we have used over the past several years to invest in growth here in Washington."

On a recent visit to ATS' main hangar on Paine Field, the facility resembled a busy service station, with eight aging Boeing 737 jets in various states of intense transformation, each surrounded by mechanics on step ladders and scissor lifts.

Three older planes were stripped to the bare aluminum. Passenger ventilation systems and wiring dangled from the ceiling. As mechanics strengthened floor beams, flight control cables were visible through the partially removed cabin floor.

Off the main hangar floor, a young mechanic repaired two small underwing panels with blown-out fastener holes.