NJ SCC Annual Report II

In a comment to my first post on this subject, Joe says:

Just think most of the work done on the schools is by non union contractors. I'll bet if they were done by union contractors they would be done faster and cheaper.

Either Joe has an extremely dry wit, or he is simply uninformed. You see, New Jersey practically requires the use of union labor on school construction projects funded by the SCC. This is done through a mandate for Project Labor Agreements (PLAs). According to he SCC web site:

On January 18, 2002 Governor McGreevey signed Executive Order 1, which provides that:

On a project-by-project basis, a state department, authority, or instrumentality shall include a PLA in a public works project where it has been determined that the agreement advances the state's interests of cost efficiency, quality, safety, timeliness, skilled labor force, labor stability, and the state's policy to advance minority and women-owned businesses.

On July 30, 2002 Governor McGreevey signed legislation that authorizes the use of Project Labor Agreements on major public works projects.

These PLAs do nothing but add costs to a project. For example, they require each contractor and sub-contractor to have a registered apprentice program, driving up the contractor's labor cost by making him hire untrained people. PLAs also specify whom the contractor must hire:

A PLA must require the contractor to provide "whatever resources necessary" to prepare for the apprenticeship of the number of women and minorities as set forth in the publicly available plan.

On top of the PLA requirement, New Jersey also requires that contractors pay the "prevailing wage" to their employees on public projects. The prevailing wage is typically set at whatever rate the unions demand (emphasis added):

The Act requires the payment of minimum rates of pay to laborers, craftsmen and apprentices employed on public works projects. Covered workers must receive the appropriate craft prevailing wage rate as determined by the Commissioner of Labor and Workforce Development. Prevailing wage rates are wage rates based on the collective bargaining agreements established for a particular craft or trade

If they fail to do so, then they are debarred from bidding on any public project in the state. The current list of debarred firms runs 20 pages.

Just how expensive is this? Let's look at a single job - new construction painting. Imagine a job where you need four painters for two and a half (8-hr) days to knock out the work, or a total of 80 hours of actual work. According to the Burlington County prevailing wage rates (pages 40-41), a Journeyman painter must be paid $45.30 an hour (including $13.25 in benefits). The contractor must also pay social security taxes of 6.2% on the labor rate, driving his total cost to $47.29 per hour, or $3,782 for the job.
But that's not all. The state requires all contractors to have apprentice programs as noted above, and in the prevailing wage determination (page 68) sets the ratio of apprentices required. For painters, it's 1:4, so on this job we have to add an apprentice. His rate is also set in the same document (page 65), and for a mid-level apprentice (1.5 years) its 70% of the journeyman's wage, or $31.71, plus $6.27 in benefits, plus $1.97 for social security - $39.95 per hour, or $799 for the 20-hour duration of the job. The apprenticeship requirement is, in effect, a 21% increase in project cost.

What would this project cost if the prevailing wage and PLA requirements were not in place? The lowest possible cost would be the minimum wage, currently $6.15 per hour, plus the 6.2% social security tax. That would set the labor cost at $522. Now, on a new construction project, I don't want a crappy job, so I would want to hire someone with some skill and experience. If I was willing to pay three times the minimum wage for this work, it would cost $1,567 to get the job done. I don't know if those are reasonable rates, so I checked craigslist in the Philly area and found an independent "Professional painter/paperhanger looking to stay busy." He claims thirty years experience, has his own equipment, is fully insured and is willing to work as a subcontractor. His rate: $25/hr. If I hire him as a sub (letting him pay his own social security out of his quoted rate) to do my hypothetical job, this painter would cost me about $2,000.

Non-union subcontractor at $2,000, or meet the PLA and prevailing wage requirements for $4,581. Which is more cost effective, Joe?

Tags: Jersey, Taxes, Education, NJSCC