President Obama found an ally in Governor Chris Christie during Hurricane Sandy, but New Jersey taxpayers should hope they'll go their separate ways on the clean-up. The President wants to direct federal tax money to unions in a way that will raise costs and spread the money thin.
The Army Corps of Engineers recently sought comments from the construction industry on using a so-called project labor agreement, or PLA, for Hurricane Sandy beach clean-up from Barnegat Inlet to Little Egg Inlet worth between $25 million and $100 million. The Army Corps will decide whether to require a PLA, which would establish a collective-bargaining agreement for any contractor who wants to bid on the project. Watch for unions singing in the rain.
In 2009, Mr. Obama signed an executive order encouraging federal agencies to mandate project labor agreements (on a case-by-case basis) for federal projects over $25 million. The agreements often require contractors to hire workers at union hiring halls (forcing non-union workers to join the union), pay into union benefit plans and force non-union employers to abide by union work rules.
Unions love the agreements because they scare away competitors who don't want to operate under such mandates. In New Jersey, a mere 24.5% of the construction industry is unionized, and the use of PLAs is a scheme for unions to gain market share.
Unions claim that PLAs help bring projects in on time, but the real effect is to raise costs. According to an October 2010 report by the New Jersey Department of Labor and Workforce Development, school construction using project labor agreements took longer on average (100 weeks instead of 78 weeks) and cost 30.5% more per square foot than non-PLA projects.
A study by the Boston-based Beacon Hill Institute at Suffolk University showed PLAs increased construction costs by 12% to 18% on state projects compared to similar projects that didn't engage in union favoritism. And that was for states that have prevailing wage laws that set floors for wage and benefit rates in construction.