Malkin: We Don’t Need to Theorize About How this Shakedown Works
In a breakdown of President Obama’s new $50 billion infrastructure construction proposal, commentator Michelle Malkin tells her readers something that we’ve been saying for quite some time: that all workers are not created equal to President Obama.
In February 2009, President Obama issued Executive Order 13502, which encourages agencies to require the use of wasteful and discriminatory project labor agreements (PLAs) on federal construction costing more than $25 million. This order also overturned a federal policy that prohibited these types of Big Labor handouts on federally-funded work since 2001 – with positive results for taxpayers.
Ms. Malkin correctly points out that the Obama order is likely to be used to ensure that as many of the projects constructed with funds from this proposed infrastructure bank as possible bear the union labor – at the expense of the 85 percent of the construction workforce that choose not to join a labor union.
Here is an excerpt from Ms. Malkin’s piece (“The Mother of All Big Dig Boondoggles,” 9/8/10):
But here’s the rub: Not all workers are equal in Obama’s eyes. And most of them will remain “idled” by the Democrats’ own design. The key is E.O. 13502, a union-friendly executive order signed by Obama in his first weeks in office, which essentially forces contractors who bid on large-scale public construction projects worth $25 million or more to submit to union representation for its employees.
The blunt instrument used to give unions a leg up is the “project labor agreement (PLA),” which in theory sets reasonable pre-work terms and conditions — but in practice, requires contractors to hand over exclusive bargaining control; to pay inflated, above-market wages and benefits; and to fork over dues money and pension funding to corrupt, cash-starved labor organizations. These anti-competitive agreements undermine a fair bidding process on projects that locked-out, nonunion laborers are funding with their own tax dollars. And these PLAs benefit the privileged few at the expense of the vast majority: In the construction industry, 85 percent of the workforce is nonunion by choice.
We don’t need to theorize about how this shakedown works in the real world. Boston’s notorious Big Dig was a union-only construction project thanks to a Massachusetts government-mandated PLA. The original $2.8 billion price tag for the project skyrocketed to $22 billion in state and federal taxpayer subsidies thanks in no small part to ballooning labor costs. In February, the Bay State’s Beacon Hill Institute found that PLAs added 12 percent to 18 percent to school construction costs in Massachusetts and Connecticut. In Washington, D.C., the Department of Veterans Affairs commissioned an independent study showing that PLAs would increase hospital construction costs by as much as 9 percent in some markets.
In short, Obama’s new Union Infrastructure Rescue Plan is a political favoritism scheme that raises the cost of doing business and bars tens of thousands of skilled, nonunion laborers who choose to run open shops from securing work. In the name of patching up America’s highways and byways, Mr. Fix It would create another gaping fiscal sinkhole to appease his special interest donors. Recovery Summer turns to Union Payback Fall.
There is no question that Executive Order 13502 and the prospect of federally mandated PLAs will likely lead to additional government waste and discrimination.
A typical PLAs includes provisions designed to drive lucrative construction projects to Big Labor. These provisions include:
- Despite the fact that contractors have their own benefit plans, PLAs require merit shop contractors to pay their workers’ health and retirement benefits to union trust funds. Thus, companies have to pay benefits twice: once to the union and once to the company plan. Nonunion employees never see any of the benefit contributions sent to union plans unless they decide to join a union and remain with the union until vested in plans.
- Paying into underfunded and mismanaged union pension plans can also expose merit shop contractors to significant pension withdrawal liabilities. Signing a PLA and exposing a company to pension liabilities could bankrupt a contractor or prohibit contractors from qualifying for construction bonds needed to build future projects.
- PLAs require merit shop companies to obtain apprentices exclusively from union apprenticeship programs. Participants in federal and state-approved nonunion apprenticeship programs cannot work on a job covered by a PLA. This means craft professionals enrolled in all apprenticeship programs other than those offered by the union are excluded from work in their hometowns.
- PLAs require merit shop companies to obtain their workers from union hiring halls. This means a merit shop company has to exclude their hard working employees from specific jobsites and exclusively use unfamiliar union workers. In other instances, merit shop employers can use a limited number of their own employees, but employers must send their nonunion employees to the union hiring hall and hope the union sends the same workers back to that specific jobsite.
- Nonunion employees may have to pay union dues and fees or join a union in order to work on a PLA project.
Numerous studies show that PLAs not only have a negative impact on the 85 percent of the construction workforce that is essentially barred from building these projects, but hardworking taxpayers as well. Studies prove that PLAs increase construction costs by as much as 18 percent. On a proposed $50 billion worth of projects, this could mean nearly $5 billion wasted. And as Ms. Malkin points out, there is certainly anecdotal data that supports this point as well.
Taxpayer funded construction should be about the best products at the best price, not handouts to politically connected special interest groups. To learn more, please visit our earlier posts:
Project Labor Agreement Basics: What is a PLA
PLA Final Rule Takes Effect Today: Let the Waste, Cronyism and Discrimination Begin
Required Reading on Multi-Employer Pension Plan Crisis
The Most Infamous PLA Job: Lessons from Boston’s Big Dig