The Truth About Project Labor Agreements

A new report released today by the U.S. Department of Labor’s Bureau of Labor Statistics indicates that from 2008 to 2009, union membership in the U.S. private construction workforce fell from 15.6 percent to 14.5 percent.

In 2009, just 958,000 members of the U.S. private construction workforce belonged to a labor union, compared to 1.195 million construction union members in 2008. Union membership in the construction industry is at its lowest point since 1995, when 908,000 union members composed 17.7 percent of the U.S. private construction workforce according to the Union Membership and Coverage Database, available at www.unionstats.com.

So how will the decline in overall union membership in the construction industry change the public policy debate surrounding project labor agreements (PLAs) and President Obama’s pro-government-mandated PLA Executive Order 13502?

In short, there will be added pressure on politicians to intervene and help keep Big Labor afloat. I predict that Congress and the White House will attempt to create construction jobs and they will try and steer those jobs to construction union members through PLAs. There will be an increase in wasteful and corrupt PLAs in federal contracting in 2010.

Congress and the Obama administration have already called for additional federal construction spending to stimulate the economy. The next step is to give Big Labor a big advantage on federal construction projects.  This will be achieved by pressing the Federal Acquisition Regulation (FAR) Council to publish their final rule implementing President Obama’s pro-PLA Executive Order 13502 into federal procurement regulations and then pressuring federal agencies to use PLAs as much as possible.

The construction industry’s jobless rate hit its highest level in at least a decade, climbing to 22.7% in Dec. 2009, the Bureau of Labor Statistics has reported. 

Numerous parties have an interest in creating jobs for construction union members.  It’s stating the obvious, but fewer union jobs spells disaster for union institutions, union retirement plans and the politicians that depend on union contributions to get elected and pass public policy favoring Big Labor.

Fewer employed union members translates into less money flowing into union retirement accounts, known in the construction industry as multi-employer pension plans (MEPPs).

A Sept. 2009 report by Moody’s Global Corporate Finance, “Growing Multiemployer Pension Funding Shortfall is an Increasing Credit Concern,” found construction industry MEPPs are only 54 percent funded with an estimated shortfall of a whopping $72.484 billion.  In other words, for every dollar that these funds owe, they hold only 54 cents of invested assets. Because some union retirement accounts are insolvent, and most depend on incoming cash to fund benefits for retired workers and future beneficiaries, the union plans are under greater pressure because of a lack of incoming revenue due to high construction union unemployment (the U.S. workforce has a similar problem with Social Security funding).

Politicians understand that a lack of union jobs in the construction industry means fewer union dues and “voluntary” political contributions deducted from union members’ paychecks that are funneled into union slush funds and PACs that support Big Labor’s political friends.

The symbiotic relationship (it is called mutualism in nature) between Big Labor and their political supporters cannot continue without healthy union institutions and continued political contributions from labor unions that fuel Big Labor’s political machine.

So the latest union membership numbers, coupled with 22.7 percent unemployment in the construction industry and the complex relationship of entities dependent on union revenue point to a greater need for the government to use PLAs.

There are valid economic and ethical reasons why promoting the special interests of Big Labor, who compose just 14.5 percent of the U.S. private construction workforce, ahead of the needs of the rest of the construction industry through PLAs is a mistake.

PLAs increase the cost of construction and waste taxpayer dollars. With the added cost premium of PLAs, there is less construction money available. And less construction money means fewer total construction projects and construction jobs. So union-favoring PLAs could actually make unemployment in the construction industry even worse.

In addition, there is no compelling reason (other than political self-interest) to create jobs for union members ahead of nonunion employees via PLAs. Nonunion employees deserve just as fair a shot to feed their families as union members. Unions should use the ultra-competitive market and tough economy as an opportunity to retool their product and make it more lean and efficient to compete in today’s marketplace instead of relying on government handouts to stay alive.

The U.S. economy and the construction industry would benefit from free and open competition, without corrupt government-mandated PLAs.