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Cessna bonuses a boon for economy
January 12, 2011
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  • By Molly McMillin

    January 6, 2011

    Bonuses that will be paid out to some Cessna employees this week will have close to a $7 million impact on the local economy, a Wichita State University economist estimated.

    About 2,400 members of the Machinists union at Cessna Aircraft on Friday will receive a $2,500 ratification bonus for accepting a seven-year labor agreement in September.

    Hourly workers on the payroll Sept. 20 – including about 370 who have received layoff notices since then – will receive the bonus, minus 37.65 percent deducted for taxes, said Machinists union representative Steve Groom. The bonus will not affect unemployment benefits for those who have received layoff notices, he said.

    Machinists union members rejected Cessna’s contract offer in September, citing job security and health care issues. But they didn’t have the votes needed to strike and accepted the contract by default.

    After taxes, the bonuses are expected to have roughly a $2.5 million impact on taxable retail sales in Sedgwick County this month, said Jeremy Hill, director of Wichita State’s Center for Economic Development and Business Research. Taking into account the ripple effect, the bonuses will have a $6.8 million impact on the county.

    The money will mean tax revenues of about $39,000 to the city of Wichita, about $20,000 to Sedgwick County and about $370,000 to the state, Hill said.

    Laid-off workers likely will put the money in savings or use it to pay off debt.

    But the majority of the others likely will spend most of the bonuses, Hill said. Some might use at least a portion of the money to pay bills or add to savings.

    Historically, bonuses are spent on home improvements, Hill said.

    “Lowe’s will likely get a big chunk of this,” he said.

    People also may buy what Hill calls “dream toys,” such as a boat or motorcycle, adding bonus money to money they’ve already set aside.

    “This definitely gives them an opportunity to go and spend on these type of retail purchases,” Hill said.

    Consumers have changed their behaviors since the recession, however.

    “They have been bargain shopping,” Hill said. “They’re not spending on lavish expenditures; they’re not doing a lot of impulse buying.”

    Lyttons Appliances owner Bob Finn says his business might experience increased activity.

    Furniture is usually a big item when people get tax refund checks, Finn said. “I’m sure appliances will get a certain amount of it.”

    He said the store often sees an increase in business in the week or two after Christmas when the aircraft plants are shut down. “And if they got money on top of being off, we get some activity.”

    Bob Razook, owner of Razook’s Furniture, isn’t sure how his business will be affected.

    “We never know,” Razook said. “There’s no way to qualify it.”

    But he’s seen a change in consumer behavior.

    They may put the money in savings and wait until they need to buy, Razook said.

    “I think people are being more conservative now,” Razook said. “They’re a little more cautious.”

    While before the recession customers may have bought a “bigger ticket” item or refurnished an entire room, today they’re filling in around what they have, he said.

    “They’re making due with one item instead of trying to redo a room,” he said.

    THE WICHITA EAGLE2011-01-06false