Indiana Senate Poised to Consider Open Competition Law

0 February 10, 2011  State & Local Construction, Uncategorized

With the full Indiana Senate in a position to consider S.B. 333, which would prohibit the use of wasteful and discriminatory project labor agreements (PLAs) on state projects, rhetoric on all sides has started to heat up.

Eric Schansberg from the Indiana Policy Institute shared some fantastic insight into the real impact of PLAs with readers of the South Bend Tribune on February 1.  Here are the highlights:

Restrictive contract provisions and government regulations often result in unintended but perverse consequences. In this case, the most troubling result of PLAs is probably that union workers from other states are favored over non-union workers from Indiana.

What are some other concerns?

The most notable is that PLAs will reduce bidding competition and increase costs. Particularly as consumers, we realize that competition is helpful. If I were to arrange laws so that you could only shop at Walmart or eat out at McDonald’s, you’d be upset. But for producers, limited competition is quite attractive. In the public sector, higher costs result in higher taxes or reduced spending in other areas. This is especially troubling with tight budgets in a rough economy.


The question is not whether monopolies have some efficiencies, but whether monopolies are a net improvement. The efficiency of monopolies is difficult to imagine. Beyond that, studies show costs for public-sector projects with PLAs to be 12 to 20 percent higher.

Second, note that the proposed legislation only speaks to PLAs in the public sector. Interestingly, we observe some PLAs in the private sector. The difference is a company would negotiate its own PLA. In the public sector, politicians vote to fund a project, but political appointees later negotiate the PLA (with different ends in mind). The bottom line is that, with the looser budget constraints and deeper pockets of government, one would expect PLA inefficiencies to be magnified in the public sector.

Third, from the field of “Public Choice” economics, we know that political intervention is attractive when there are concentrated and obvious benefits for one group – and diffuse and subtle costs for another group. The recipients are excited while those bearing the costs don’t notice. The recipients lobby for such restrictions and tell us why the legislation is good for us. Those in the general public are busy mowing their lawns and raising their children – and won’t pay attention.

Likewise, we know that suppliers (of labor or product) have an incentive to restrict their competition with laws that prevent them from participating in the market – or indirectly, by increasing their costs and making it more difficult for them to compete.

These are especially important considerations because labor unions are famous for using public policy to reduce competition in labor markets (for example, through “prevailing wage” laws) and product markets (most notably, with respect to international trade). And by definition, unions are cartels in labor markets – groups of (labor) suppliers who collude to extend their market power. Putting it more succinctly: If PLAs are not to their advantage, why would they avidly advocate their use?

Indiana’s state politicians are left with a difficult choice: Will they benefit union construction workers (who are fewer but better-organized politically) over nonunion construction workers (who are more numerous but less-organized)? And will they benefit union construction workers at the expense of taxpayers?

This is an excellent breakdown of the issue.  Eric is right.  The decision to move S.B. 333 forward is really about whether lawmakers want to help the taxpaying public or a politically-connected special interest group.

Big Labor knows that the public is turning against special interest handouts that deny Americans value for their tax dollars.  As a result, union bosses are clearly trying to lock down as many of these discriminatory agreements before lawmakers in Indianapolis take steps to protect taxpayers.

Here at, we urge Hoosiers to contact their state senators and tell them to pass S.B. 333.

Also, visit our earlier posts for more information on Big Labor’s efforts to monopolize construction in Indiana at the expense of the 72 percent of the construction workforce that chooses not to join a labor union.

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