The union employees at Boeing Co. may not have succeeded in convincing the aerospace company to restore its frozen pension plan, but they certainly made significant strides in enhancing the company’s 401(k) benefits and wages.

Whether other companies will look at Boeing’s enhanced benefits and follow suit is unknown, but Marick Masters, a professor emeritus of business at Wayne State University in Detroit, says the demand for the return of pensions was a point of leverage for the union workers in negotiations. Masters says he believes the workers used the lofty demand for restoration of the defined benefit plan to generate better offers for wages, ratification bonuses and contributions to the defined contribution plan.

“The way I view it is that the workers are using their leverage to get as much financial security that will protect them … from inflation, enable them to catch up a bit from the past, and also protect them going into the future when they think about retirement,” Masters says.

In the agreed with the International Association of Machinists and Aerospace Workers, Boeing will provide a 38% pay raise over the next four years, a $12,000 ratification bonus and a 100% 401(k) match up to 8% of pay. The machinists voted 59% in favor of the new contract.

That level of employer matching contribution is better than 95% of the plans that responded to the 2024 PLANSPONSOR Defined Contribution Benchmarking survey. The survey found 4.8% of plan sponsors reported matching contributions of 6% of pay or higher.

Ripple Effect not Guaranteed

Masters notes that Boeing was vulnerable during the negotiations and was suffering because of how it mismanaged its workforce.

In terms of a potential ripple effect that could encourage other employers to enhance 401(k) benefits and wages, Masters thinks that will depend on industry, occupation and the financial state of the firm. Comparing the Boeing strike to other strikes by skilled workers, such as in the longshoring industry, there have been similar wage increases.

“But when you get beyond that … I think there’s a push for certain legislators across the country in municipalities to increase the minimum wage, but it can [be] a double-edged sword,” Masters says. “[Raising the minimum wage] can also lead to the exodus of business if they can’t pay those costs.”

He adds that only about 10% of the U.S. workforce—and only 6% of the private sector workforce—is represented by unions.

“I think when companies see that in order for them to recruit people, they need to pay them more … they’ll respond to that,” Masters says. “But it’s going to depend on the market conditions that they’re responding to, and I think that it’s not going to be likely that many groups of workers are going to get these kinds of significant pay raises in a very compact period of time.”

Harry Katz, a professor of collective bargaining at the Cornell University School of Industrial and Labor Relations, similarly argues that the Boeing workers were in a unique position as essential workers who cannot be easily replaced, working at a company where production cannot be easily moved.

“There aren’t that many workers who have that kind of leverage anymore, given capital mobility,” Katz says.

Significance of DC Plan Changes

Katz adds that he was not surprised that Boeing did not agree to return to a defined benefit pension plan and, instead, substantially increased the 401(k) match.

“It’s interesting that [Boeing] was willing to provide so much of a contribution in order to convince the workers to accept, [and] they only got 59% approval,” Katz says. “There’s a rather strong widespread movement away from pension plans, and to some extent, this reinforces that, because Boeing held their position and didn’t reinstitute it.”

One advantage defined contribution plans have over pension plans is that an employee always owns their own plan contributions, so the whole benefit is not hinged on vesting requirements and years of service at a company. That makes it easier to save for retirement as a worker moves from job to job.

However, Katz says it is possible that many of the union workers did not fully appreciate the value of DC plans, as many are used to the idea of a pension plan managed by the company. As the final vote was close and the prior two proposals were rejected, Katz says it is possible the workers did not really understand the potential benefit of the 401(k) plan improvements.

“I’ve done some training programs with auto workers, and a number of the younger workers were not so repelled by defined contribution,” Katz says. “They’re used to investing in the stock market, and they like the flexibility. They didn’t see it as such a scary thing, compared to the older workers who were less familiar with it.”

In general, Masters says workers are looking for more security when it comes to their retirement savings, and many believe pension plans provide that, as 401(k) assets are heavily influenced by the swings of the stock market. But Masters says the contract agreement is still a huge win for the union workers.

“I think it’s a very lucrative contract, and the workers tried to get as much as they could at a time when the company was vulnerable,” Masters says. “Overall, it seems like a magnificent agreement for the workers compared [with] where they were at the start of the negotiations.”