The U.S. v. Construction Workers

SOARING construction wages are the frequent butt of jokes by comedians and cartoonists. "Plumbers make so much money these days that they have to work about a week, with overtime, to pay for a Ford Maverick," gibed Tennessee Ernie Ford in a recent radio commercial. What was once mere grumbling has lately turned to alarm among businessmen, economists and Government officials. They reason that unless the U.S. finds a way to stop exorbitant pay increases in construction, the pattern will continue to spread into many other industries and to undermine the nation's fight against inflation. The problem may even help lead the Nixon Administration to a tougher incomes policy. Last week Paul McCracken, chairman of the Council of Economic Advisers, told a congressional committee that he "would certainly not" rule out the possibility that the Administration might establish a broad wage-price board this year.

President Nixon has labeled the construction situation a "crisis." He summoned construction-industry and labor leaders to the White House last month and gave them 30 days to devise a voluntary plan to control the wage-and-price spree in building. The Government is construction's biggest customer, and Nixon has warned: "Unless the industry wants Government to intervene in wage negotiations on federal projects to protect the public interest, the moment is here for labor and management to make their own reforms."

Political Power. The question is whether the 17 A.F.L-C.I.O. construction trades unions and their nearly 3,000,000 members in 10,000 locals can be persuaded to surrender some of their extraordinary bargaining powers. This week the first indications of the union position are likely to appear when the construction trades' executive council holds its annual midwinter meeting in Miami Beach. If the unions balk at cooperating with Nixon, say top Administration officials, the President will hardly be able to escape a bruising battle. Nixon would prefer to avoid a showdown because the hardhats have enormous political influence.

Construction is the nation's largest industry, bigger than autos and steel combined, and it has a pervasive effect on almost every other industry. When the price of roads, schools, hospitals, factories and housing rises faster than the productivity of the men who build them--as it has done--that bill is passed on to consumers and taxpayers through inflation. Construction costs have been climbing at a rate almost double that of all U.S. prices, helping to lift the cost of new homes beyond the reach of millions of middle-income families. In Manhattan, says Architect Richard Roth Jr., "you cannot rent an apartment at a price high enough to justify building it."

Rising construction costs have forced some businessmen to defer plans for new factories or to shift production abroad, depriving Americans of jobs. Voters, fed up with local tax increases, are rejecting bond issues for schools and other public projects with increasing frequency. Labor leaders themselves are worried. Says Leonard Woodcock, president of the United Auto Workers: "There is no question that the wage increases in construction are excessive."

Last year labor settlements gave union construction workers an average wage raise of 18.3%, more than double the 8.1% increase in manufacturing. The real gap was even larger because construction pay was already inflated far above the national average. Building tradesmen won pay and fringe-benefit rises averaging 90.4-c- an hour, compared with 24.3-c- for workers in other industries. Many settlements will virtually double construction wages over the next three years. For example, hourly pay for Wichita operating engineers will go up from $5.40 to $10.50: Hartford, Conn., electricians, from $6.75 to $12.50; for Los Angeles sheet-metal workers, from $7.06 to $12.06.

One study of 27 areas found that workers in seven of the lowest-paid building trades averaged $11,342 yearly in wages and fringes. Indiana ironworkers were averaging $15,828 a year, and Southern California carpenters were collecting up to $22,234. Says Cleveland Contractor William J. Hunkin II: "In 1969,1 paid one operating engineer $34,928. I paid one common laborer $27,844 and another $23,983. Seven of my other common laborers earned $19,500 to $22,500." In New York City, some electricians get $35,000 a year.

Creating Shortages. The building unions have been able to extort outsize increases because they control most of the labor supply. Contractors get their manpower for each project through union hiring halls. Unions generally dictate crew sizes and working conditions. If a contractor refuses to schedule regular overtime, he is given the dregs of the labor pool. Unions have been able to create artificial labor shortages by restricting admission; most insist on a tortuous apprenticeship training of three to five years. Local unions usually do their own bargaining, city by city and craft by craft. When one powerful unit wins a fat increase, every other union leader in the area must try to leapfrog to a higher settlement--or risk losing face and perhaps his job. No wonder that one-third of the construction negotiations end up in strikes.

Few builders can withstand a long strike because they work with borrowed capital that can be repaid only after they collect for a complete job. Fragmented bargaining produces bizarre effects. When a strike hit Trenton, N.J., carpenters had only to drive beyond the city limits to find plentiful jobs, many with the same contractors they were striking.

Fighting back, more and more contractors have begun to operate on an open-shop basis, which enables them to avoid strikes, forced overtime, featherbedding and the chronic friction between crafts. Of course, open-shop contractors have no access to union hiring halls, so their main strength is in the suburbs, where unions are less entrenched. Big engineering and construction firms that employ 100% union labor complain that in two years they have lost $7.5 billion worth of work to open-shop and nonunion operators. Some 3,000 construction firms have banded together in a nationwide association, the Associated Builders and Contractors, Inc., to promote open-shop building. More than 110 corporations that are big buyers of commercial and industrial buildings have joined the Construction Users' Anti-Inflation Roundtable, chaired by former U.S. Steel Chief Roger Blough. The group has had some success in persuading companies to refuse excessive overtime and to postpone projects in order to help contractors resist union demands.

President Nixon has called for "more consolidated bargaining, on an area or regional scope." That would reduce strikes and leapfrogging wage settlements, but there is no prospect that it could be put into effect quickly. Nixon's Construction Industry Collective Bargaining Commission, a twelve-man group of contractors, labor leaders and Government officials, agreed a year ago that national unions should be granted veto power over strikes called by extremists in local unions. The commission also suggested giving union delegates binding authority to sign contracts that could not be voted down later by intransigent members. Both changes would require amendments to the Landrum-Griffin Act, but the Administration has so far made no move to introduce the necessary legislation.

Nixon has ruled out for the moment such tough moves as canceling some federally financed construction projects and suspending the Davis-Bacon Act. That law, which was passed in Herbert Hoover's Administration, requires that local "prevailing wages" be paid on all federally aided building jobs. With much justice, critics complain that the Labor Department drives up construction costs needlessly under Davis-Bacon by rubber-stamping the highest union wage rate as "prevailing" even though actual rates may be generally lower.

Hard Line? Without a voluntary agreement between unions and contractors to attack the wage-price spiral, only drastic action by the President or Congress can spare the U.S. from another burst of building wage inflation. Construction costs are already poised for a 14% rise this year, in great part because of wage increases already granted but not yet effective. To keep the situation from growing more painful. Administration officials are leaning toward a new policy. Provided labor and industry agree, Nixon would appoint a commission to review construction wage settlements and perhaps suggest terms. Such panels functioned smoothly during World War II, the Korean War and the 1961 labor troubles at U.S. missile sites. To make such a deal, labor may well ask an exorbitant price, including an easing of federal attempts to reform apprenticeship rules and to get more blacks into the unions.

Nixon will face a momentous question: Will the economic and political gains from taking a hard line against the hardhats outweigh their potent enmity in the 1972 election? Having talked so much about the need for bargaining changes, the President would lose stature with other voters if he accepted a rebuff from the unions. Now that gradual withdrawal has defused Viet Nam as a political issue, Nixon no longer needs support from the construction workers as much as he once did. And it is becoming plainer every day that inflationary wage raises for the 4% of the labor force engaged in construction are won at everybody else's expense.

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