Indentured Servitude in the USA and the Biggest Ponzi Scheme Ever

0 April 26, 2010  Federal Construction, State & Local Construction, Uncategorized contributor and former Missouri state senator John Loudon offered his thoughts on the Obama Administration’s effort to encourage the use of wasteful and discriminatory project labor agreements (PLAs) on large-scale federal construction in a April 25 post titled, “Indentured Servitude in the USA and the Biggest Ponzi Scheme Ever.”

Specifically, Mr. Loudon discussed how Big Labor is using PLAs to prop up their beleaguered pension programs.

Here are the highlights:

The worst part of the Obama executive order is the real reason for it. According to a September, 2009 report by Moody’s Investor Services, construction union pensions in 2008 were just 54% funded. Just like Social Security, the promised union pensions were too fat. They were built on the similar demographic flaw of social security. The system would pay full benefits to the earliest retirees, but would only be able to continue to do that if the ratio of workers to retirees is sustainable. So what does it mean when the ratio fails? How do you restore the footing on a plan so underfunded when the ration of worker to retiree continues to get worse?

You cannot violate existing contracts by slashing benefits to the retirees enjoying archaic, fat benefits. If you offer dramatically reduced benefits to the new workers, it will be difficult to attract them. What worker wants to put in a lifetime of work to fund the retirement of a bunch of people he never met, who are receiving benefits many times as rich as what he will receive? The answer is very few. The savvy skilled tradesman would rather go the merit shop contractor and build up his own 401k. Who wouldn’t? But since “Mars needs women”, and the union retirees and older members still need people paying in, no one is telling the younger tradesmen they are hosed. Meanwhile, since you can only “cheat some of younger union members some of the time, the search is on for new funding sources. There are exactly two. Before moving to those, consider this dilemma. What about those workers who have put two, three, or even ten years in and are now vested in the union pension plan? How can they leave and walk away from their investment? On the other hand, how can they keep working, knowing that pension plan is insolvent? They are the ponzies, trapped in service to their masters.

A number of proposals in Congress would unload the liability onto taxpayers. Not only is continuing the “too big to fail” bailout strategy, a violation of all that is just, but it continues to reward irresponsible planning. It would allow union employers to unload their liability, which now tips the playing field against the employers who are planning properly.

The second strategy to screw non-union workers and their employers is the current course of forcing union-only PLAs at all levels of government. Not only does this create more union man hours, it does something much more in the category of evil genius. When a non-union tradesman works under a PLA, the employer puts around $6 per hour into the union pension fund. These are dollars the worker earns but will never enjoy because the vesting period is five years and few if any construction projects run for five years. Clever, huh?

Mr. Loudon brings up a very important issue, that PLAs have a disproportionately negative impact on nonunion workers that are able to work on PLA projects.  An October 2009 report by Dr. John R. McGowan, “The Discriminatory Impact of Union Fringe Benefit Requirements on Nonunion Workers Under Government-Mandated Project Labor Agreements,” finds that employees of nonunion contractors that work on projects subject to government-mandated PLAs suffer a reduction in their take-home pay that is conservatively estimated at 20 percent.

The McGowan report found that nonunion contractors are forced to pay in excess of 25 percent in benefit costs above and beyond existing prevailing wage benefit laws because of a PLA’s union pension fund contribution mandate language, which prevents taxpayers from receiving the best possible price from nonunion contractors in the competitive bidding process.

This is just one more example of why PLAs are bad for taxpayers and the 85 percent of the construction workforce that chooses not to join a labor union.

This post was written by and tagged Tags:, , , , , , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *