South-Western College Publishing - Economics  
Boeing, Boeing, Gone? No - The Strike is Over
Subject Unions and strikes
Topic Labor Markets
Key Words Strike, contract, union, benefits, raises, bonuses
News Story

Boeing engineering workers represented by the Society of Professional Engineering Employees in Aerospace have returned to work after a six-week strike. The new contract, approved by 70 percent of voting members, gives the union most of what it wanted. The members will retain their current level of health-care benefits, and will receive annual raises of 3-4 percent plus bonuses tied to meeting production goals. Workers will receive $1,000 after 30 days, an additional $500 if Boeing delivers 225 planes in 2000, and 491 by March 1, 2001. If the targets are not reached due to factors outside the control of the union-covered workers, the bonuses will be paid anyway.

The strike was effective because it delayed the delivery of airplanes: only 18 were delivered, compared to 58 in the same period in 1999. Although the engineers are a small fraction of the approximately 200,000 workers employed by Boeing, they provide vital services, such as the interpretation of designs and technical drawings.

(Updated May 1, 2000)

Questions
1. Draw a supply and demand diagram of the labor market for engineering workers. Mark the equilibrium wage and employment level assuming that the market is competitive.
  a) When engineering workers are unionized, they may be able to increase the wage level independently of supply and demand. Mark such a wage level with a horizontal line on your diagram.
  b) What happens to the level of employment as a result?
2. The change in the level of employment depends on the elasticity of demand for labor.
  a) What are the determinants of the demand for labor?
  b) In the case of Boeing engineering workers, would you say that the elasticity of demand for their labor is relatively high or low? Why? Explain in terms of the determinants of the elasticity of labor demand.
  c) Does this make the engineering workers powerful? Why or why not?
3. The awarding of bonuses based on productivity is a means of ensuring that the wage rate is not too much above the competitive equilibrium wage.
  a) Why is this so?
  b) Why does this matter?
Source David Field, "Boeing engineers end weeks-long strike," USA Today, March 20, 2000.

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