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The recent front page diary reports on the arrest of a man who signed a contract to pay "prevailing wage" (which really means union wage) on a government construction contract, and then forced the workers to cash their checks at his bank and "give" him back half or more of their wages. Let's hope for fines, restitution, and imprisonment for this creep; that's the easy part.

The hard part is covered by four or five commenters in the thread, including me. What does it mean when the so-called prevailing wage is as at least double what laborers were willing to take? Nobody forced these workers at gunpoint: they still thought it made economic sense to work for as little as $10/hour?

First, it is pointed out in those comments that the "prevailing wage" includes benefits, but given the way this scam operated, the workers probably retained most of those, as they are taken out before a check is issued. So there is an apples-to-orange comparison, and that means that a $10/hour (in cash post-kickback) employee was probably getting closer to $25 when the value of benefits is added back. Nevertheless, the "prevailing wage" in the sense of the contract is obviously much more than the prevalent wage for people who are qualified to do the work.

That still means the contract was for double (as opposed to triple or more) what workers would take for the job. Mind you, the original DKos article refers to "skilled workers", but that's not really so. A tile setter does qualify as a skilled laborer, as it requires several years' of apprenticeship. Whether a tile setter really needs as much apprenticeship as, say, a lawyer, is another question. Even so, we're talking about a position that would pay $140,000 (inclusive of benefits) on a 40-hour week, 50-week year basis, which is a lot of money in almost any profession. A "mason tender" is an assistant to a bricklayer, nor is "laborer" generally used for a skilled worker. So unskilled laborers were to be paid $50/hour, which seems even more extreme.

The problem is that at the same time, as much as 40% (and growing) of private construction work in New York City is now non-union. So what is developing is a two-tier structure: a high-paid cadre who work in public-sector construction, at a time that the public sector is shrinking, and a much lower-paid pool outside a union (as is true of over 80% of construction workers). I doubt if this is a recipe for union growth and economic health. No one seriously believes that wages are going to triple or quadruple in a major industry, at least not without a huge ripple effect. The important, praiseworthy drive to unionize Walmart workers isn't going to result in tripled wages: more like 25% raises and better health insurance, in the best case. So no one, by extension, seriously believes that these unions are going to bring those 80% non-union laborers into their fold. Instead, they'll continue working on a small number of taxpayer-subsidized projects where profitability (whence costs) are not applicable.

This isn't the only example where unions seem to collude with very big business or with government in a short-sighted way. When we lament the shrinking membership in unions, maybe sometimes it's their own short-sighted choice.

Originally posted to Andrew Lazarus on Tue Feb 05, 2013 at 10:28 AM PST.

Also republished by In Support of Labor and Unions.

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Comment Preferences

  •  You're kidding right? (7+ / 0-)

    Prevailing wage has been an important piece in government contracting that keeping us from having race to the bottom. It is the statement by we the people that we the people will pay everyone a reasonable wage for their labor.

    It is a very big tool to make sure all the money does not go to the top. It also put bidding on an even ground, all companies must pay their labor the same so big companies can not come in and blanket underbid everyone because they still have to pay the actual workers a decent wage.

  •  agree: hire Mexicans, pay $10, deport injuries (3+ / 0-)
    Recommended by:
    norwood, melfunction, Dirtandiron

    what could go wrong?

    from your diary, Andrew, it sounds like you may be a lawyer, or other professional.

    Can you tell me why your employer shouldn't hire Indian professionals to do your job for 25% of what you make?

    It's not a fake orgasm; it's a real yawn.

    by sayitaintso on Tue Feb 05, 2013 at 11:15:32 AM PST

    •  Because it's reshored (0+ / 0-)

      The last two jobs I was offered—I work in varieties of software—had been brought back from overseas because American programmers are better (plus communications delays, etc.).

      One of the problems with illegal immigrants is that they can be paid less than minimum wage, no workers comp, and deported if they make trouble. How you plan to solve this by paying one-fifth of the construction workers five times the minimum wage needs some fleshing out.

  •  No (2+ / 0-)
    Recommended by:
    melfunction, Dirtandiron

    I'm sorry.

    We understand that setting an artificial floor to wages can be a barrier to entry in the labor market for individuals. But that negtive is offset by the positives given to people participating in the workforce as a whole.

    "I'll believe that corporations are people when I see Rick Perry execute one."

    by bink on Tue Feb 05, 2013 at 11:20:29 AM PST

    •  And we concluded this how? (0+ / 0-)

      Especially the amount. I'm not arguing against the minimum wage, but there must be some level at which the positives for the workforce as a whole than the negatives, unless we decide that the unemployed aren't in the workforce. And $50/hr sounds high to me. The fact that it doesn't seem to be sustainable outside the public sector is a big red flag. Well, maybe not red. Crony laborism doesn't get a red flag.

      •  What You Are Talking About Here (1+ / 0-)
        Recommended by:
        Dirtandiron

        Is called the "union wage premium," which is one of the phenomena most studied by economists who are investigating the effects of unionization on labor markets.

        Here is an article from the Economics Policy Institute:

        http://www.epi.org/...

        "I'll believe that corporations are people when I see Rick Perry execute one."

        by bink on Tue Feb 05, 2013 at 12:33:28 PM PST

        [ Parent ]

        •  We're making the same point, (1+ / 0-)
          Recommended by:
          FG

          but with different reactions. There comes a point where the union wage becomes the province of a few, and not especially relevant. Yeah, union wages in GM influence non-union wages at Nissan, to keep Nissan workers from unionizing, if nothing else.

          But in this case, we are seeing a different phenomenon. Obviously, the very high union wage isn't affecting the broader wage scale for non-union workers, or at least not much, since laborers are available for much, much less. So let's go from that empirical observation backwards: why not?

          Why not, I suggest, is because public-sector construction project labor costs are the result, in part, of a non-economic process and the result is not a premium of 25% (the estimate of your article), rather 200% to 500%. The lower figure is also, ballpark, what non-unionized but labor-honoring employers (In-and-Out Burger, Costco [partially unionized]) pay over Walmart and its ilk. I well believe,as their management obviously does, that they get it back in better quality of work performed. For example, Costco has a lower rate of employee theft than Walmart.

          I think it's realistic that Walmart workers can unionize and move up 25% (plus many other benefits). I don't believe in 200% or 500% potential raises. Only hedge fund managers get that. So, what is the plan of these unions? To bring more work under union auspices, or to guarantee a very comfortable living for a comparatively small number of current members of the union working on public-sector projects?

    •  Prevailing wage is not a "floor" to wages (0+ / 0-)

      It's not really like a minimum wage, which people might mistake as a low wage.  Prevailing wage lists exactly what each group/trade is paid on a job (although they could be paid more).  It lists a wage amount and benefit amount for each type of job for each project on which it applies.  If benefits are not paid through a qualified benefit program, they must be paid to the worker in cash.

      For a current example, a laborer in an unskilled laborer work group that might make $12 or $15 at a non-union wage (and could have or not have benefits) would receive a prevailing wage of about $24 per hour with an additional benefit payment of around $13.50 per hour.  That would make the potential wage floor for an unskilled laborer on a prevailing wage job $37.50 per hour.  

      That's more than most people with college degrees and master's degrees make and well above the median wage in this country.  

      "When people show you who they really are, believe them." - Maya Angelou

      by Pennsylvanian on Tue Feb 05, 2013 at 01:47:17 PM PST

      [ Parent ]

  •  For starters (3+ / 0-)
    Recommended by:
    JR, melfunction, Dirtandiron

    Any skilled construction worker laboring for $10/hour is doing it at figurative gunpoint; hungry kids at home, eviction notice just arrived or similiar disaster looming.

    This diary misstates construction work reality, especially these days, you don't get 2000 hrs work a year.  You get 500 or 1000 hours. So that $50/hour is a annual wage of closer to $50,000. Good, but not that good.

    And I'd pay money to see the diarist lay tile without the several years of the training he so casually disparages.

    Prevailing wages are not union wages, either.  They are derived from wage rate reports on regional jobs submitted by both union and non-union contractors.

    Finally, some of the largest and most successful contractors in the world routinely pay higher-than-prevailing wages and manage to make massive profits, because well-paid, union labor is considerably more efficient, than the poorly trained workers that enamor the diarist.

    This diary got one thing correct.  The huge pool of poorly paid construction workers is a great threat to workers' standards and  unions' survival.

    Orly, it isn't evidence just because you downloaded it from the internet.

    by 6412093 on Tue Feb 05, 2013 at 11:51:24 AM PST

    •  Economic ROFL (0+ / 0-)

      Maybe the reason you only get 500 hours at $50 is that it's a higher wage than most contractors feel they have to pay. Sure, some companies feel they get their money's worth with higher wages. Costco vs. Walmart. In-and-Out Burger vs. Burger King. But in no case are they paying double and triple the competition. The only way you get that is fiat wage scales, and the prevailing wage is an obvious example of "regulatory capture". Econ 101: you can't get a construction crew of legal workers to work for $10-$30 when there are other jobs at a prevailing (that is, most common) scale of $50-$70. Why wouldn't the desperate worker take one of those jobs? Because they only exist on a relatively small number of projects, at the public teat. This is another style of crony capitalism.

      BTW, I probably wouldn't make a good tile layer with 100 years of practice (I'm more-than-average clumsy), and likewise I wouldn't make a neurosurgeon with 100 years of practice. I still find it hard to believe that the latter takes only about twice, maybe thrice, as much training as the former.

    •  Actually, prevailing wages are union wages (2+ / 0-)
      Recommended by:
      FG, Andrew Lazarus

      ...in some states, such as Pennsylvania.  They track nearly exactly to the union pay and benefits, and even to when the union pay raises go into effect.  

      Your proposition that workers should get $50 an hour to work 500 hours a year is ridiculous.  Also, I really take offense to the argument that you are either union or poorly trained, and that union labor is more efficient than any other kind.  These statements are simply untrue.

      Actually, I would really be surprised if you have any direct experience with wages or benefits in the construction industry, either union or non-union, after reading your post.

      "When people show you who they really are, believe them." - Maya Angelou

      by Pennsylvanian on Tue Feb 05, 2013 at 01:26:17 PM PST

      [ Parent ]

      •  I have direct experience with (1+ / 0-)
        Recommended by:
        Dirtandiron

        construction labor, including working at the craft, for over 30 years.

        Several studies support my assertion that union labor is more productive.

        There are many areas in many states where union wages don't "prevail."

        Orly, it isn't evidence just because you downloaded it from the internet.

        by 6412093 on Wed Feb 06, 2013 at 11:04:40 AM PST

        [ Parent ]

  •  Is "Prevailing Price" OK? (0+ / 0-)

    I've tried to respond individually, but as another question, how do the negative commenters feel about committees setting "prevailing prices" for consumer goods. Would they start to wonder if black-marketeers sold these goods for half (or one-fifth) the "prevailing price", if that price wasn't set artificially high to the benefit of colluding large organizations?

    •  They charge what the market will bear. n/t (0+ / 0-)

      Where are all the jobs, Boehner?

      by Dirtandiron on Tue Feb 05, 2013 at 05:00:08 PM PST

      [ Parent ]

      •  That's in a free market (0+ / 0-)

        You can't really google for "Fair Trade Laws" because fair trade has different meanings now. Short version: manufacturers could, and I suppose in some jurisdictions still can, enforce minimum prices that were more than the fair market price would be.

        We know what the fair market price of laborers without a union is. Can you explain why the union wage is double (plus) that? We're seeing union wages for a few, and crappy for the rest. And I wonder if the few aren't picked nepotistically.

  •  Construction laborers are not unskilled (0+ / 0-)

    They operate forklifts, work as pipelayers, grade checkers, finish concrete for curbs and sidewalks, and they do some bricklaying. If you didn't consider it beneath your dignity to quote-unquote "work with your hands" you could make that, too.

    Where are all the jobs, Boehner?

    by Dirtandiron on Tue Feb 05, 2013 at 04:58:23 PM PST

    •  Forklift = Teamster (0+ / 0-)

      One second with Google shows that Forklift operators are Teamsters, not members of the Laborers and Mason Tenders Union. AFAICT, that union comprises largely unskilled laborers. If you have a refutation, please be specific, because right now it looks like you know even less about this than I do.

      •  Likewise, pipe layers have their own union n/t (0+ / 0-)
        •  Wrong on both counts (1+ / 0-)
          Recommended by:
          6412093

          Forklifts are operated by Laborers when working with Bricklayers. Operators run them for everything else. You are confusing pipelayers and pipefitters-two different jobs. I have worked in construction for 25 years, that is how it works around here.

          Where are all the jobs, Boehner?

          by Dirtandiron on Wed Feb 06, 2013 at 03:21:14 PM PST

          [ Parent ]

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