Ruling will hurt construction

The Great Recession has taken its toll on the U.S. economy, and the construction industry has been hit the hardest. Almost one-quarter of all construction workers are unemployed, and despite the infusion of infrastructure spending by the 2009 stimulus package, construction businesses and their employees are still struggling.

Rather than helping, a final rule released April 13 by the Obama administration encourages the government to put its foot on the throat of nonunion federal contractors and their employees.

The rule implementing President Obama's Executive Order 13502 will deny qualified contractors and their skilled employees a fair shot at federal projects.

In addition, the rules, which take effect May 12, end accountability for taxpayers by eliminating competitive bidding on public projects. Contracts no longer will be awarded based on quality and price; rather, they will be awarded based on whether a contractor signs a collective bargaining agreement with unions through a project labor agreement (PLA).

Executive Order 13502 pushes federal agencies to mandate the use of anticompetitive PLAs on federal contracts costing more than $25 million. With PLAs, labor for construction projects must be supplied by union hiring halls, nonunion employees must pay union dues, and contractors must adhere to inefficient union work rules and contribute to union benefit and pension plans on behalf of employees.

This order discourages competition from nonunion contractors by shackling them with added costs and requirements that harm their nonunion employees.

For example, PLAs typically force employers to pay benefits into union-managed plans, but employees will never see the benefits unless they join a union and become vested in these plans. Under a PLA, employers that offer their own benefits, including health and pension plans, often continue to pay for existing programs while also paying into union plans.

An October 2009 report by Dr. John R. McGowan of St. Louis University found that had Order 13502 applied to federal contracts in 2008, additional costs incurred by employers related to wasteful PLA pension requirements likely would have ranged from $230 million to $767 million. Lost wages for nonunion construction workers would have ranged from $184 million to more than $613 million. In total, McGowan estimates that the Obama order encouraging PLAs would have cost nonunion workers and their employers $414 million to more than $1.38 billion in 2008. These calculations would be similar in 2010 and beyond.

Unions represent only 14.5 percent of the industry, with the remaining 85.5 percent of the workforce choosing not to belong to a union. Penalizing so many to reward so few is bad public policy.

Instead of choosing favorites, the administration should create fair and open competition for all members of an industry already struggling with nearly 25 percent unemployment. Doing so will stimulate competition, which means taxpayers get the best product at the best price.