Economist says Onex pay cuts could affect other Wichita plants

WICHITA, Kan. (AP) _ The pay cuts workers at The Boeing Co.'s commercial aircraft plant are expected to take when a Canadian investment firm buys the facility could mean lower wages for the city's

Sunday, June 12th 2005, 12:07 pm

By: News On 6

WICHITA, Kan. (AP) _ The pay cuts workers at The Boeing Co.'s commercial aircraft plant are expected to take when a Canadian investment firm buys the facility could mean lower wages for the city's other aerospace workers, a local economist says.

Onex Corp., which is buying Boeing's commercial aircraft operations in Wichita and Tulsa and McAlester, Okla., has been negotiating with unions for concessions that would include cuts in wages and benefits. Boeing traditionally has had the highest paying aerospace jobs in the city, but at least some workers face a 10 percent wage cut when Onex takes over. The sale is expected to be finalized Thursday.

Janet Harrah, director of the Center for Economic Development and Business Research at Wichita State University, expects pay cuts at Onex to hold down increases at other area aerospace manufacturers.

``It will slow the overall wage growth in the industry, but not enough to turn it negative,'' Harrah told The Wichita Eagle.

But Nigel Wright, managing director at Onex, said he doesn't expect any change.

``I'd be really surprised if it has an impact on other workers,'' he said.

Martin Perline, a professor specializing in labor economics at Wichita State University, agreed.

``Even with the 10 percent, they would be the highest (non-military) payer in Wichita, so I wouldn't think it would impact other aircraft workers,'' he said.

According to a Kansas Department of Labor report released last month Wichita's manufacturing workers make about $200 per week more on average than their counterparts nationally _ $863 per week locally versus $662 per week nationally. The figures do not include benefits.

Harrah said Boeing pays its Wichita employees 22 percent to 24 percent more than workers at Cessna, Raytheon and Bombardier. Local subcontractors say Boeing pays 50 percent to 150 percent more than them. The wage disparities have given workers an incentive to jump from plant to plant.

``With (Onex) wages potentially decreasing overall, it would probably reduce some of the pressures on other manufacturers,'' said Jim Schwarzenberger, vice president for work force solutions at the Wichita Area Chamber of Commerce.

But Wright points out there will still be a pay gap between Onex and the other airplane makers. He believes that if demand for skilled aircraft production workers increases, companies will have to pay more for them.

``If that happens to us, we find that we cannot hire enough good people at the wages we negotiated, then we would have to go back to the union and agree to a process for offering additional compensation of some sort,'' Wright said.

Onex will likely rely more on subcontractors than Boeing did because the plant will no longer have to buy parts from Boeing.

``Given the high level of skilled employees in this part of Kansas, and the benefits of a short supply chain,'' Wright said, ``we would expect local companies to be competitive bidders on much of this work.''

While that could mean a reduction in pay for the same work or even the same worker, it's still expected to benefit the Wichita economy.

``Outsourcing gets a bad name,'' said Ron Christy, a research analyst at Wichita State, and a consultant at Southwest Manufacturing Inc., which makes machined components for the aerospace industry, ``but if you are outsourcing to a domestic contractor, it means more work for local people.''