Testimony from the Commonwealth Foundation for Public Policy Alternatives to the Pennsylvania House Republican Policy Committee
December 09, 2009
We would like to thank the members of the House Republican Policy Committee for inviting us to submit testimony on the important issue of Project Labor Agreements (PLAs) in Pennsylvania.
As you know, PLAs are agreements between government and state contractors that contain stipulations beneficial to unionized labor, such as: requiring employment of unionized workers, use of union apprentice programs, and payments into union funds.
Yet PLAs result in higher costs for taxpayers and create unfair and discriminatory contract privileges.
Currently this issue is of vital importance in Pennsylvania with the Department of General Services (DGS) issuing numerous prison projects with PLA stipulations. Fortunately, two of these prison projects have had their PLA provisions rescinded; however, by far the largest one, a $400 million prison project in Montgomery County, is still underway on PLA terms.
This arrangement is nothing more than a carve-out for special interests. The Bureau of Labor Statistics reports that only 15.6% of laborers in Pennsylvania’s construction industry are unionized, yet the DGS is unabashedly pandering to unions through PLAs.
A closer look at the prison project in Montgomery County reveals just how unfair it is. From the outset, 18 different unions, mostly from Philadelphia, have meticulously carved out jurisdictions for every work activity. All contractors must pay into a large assortment of union funds for any work employed across union jurisdiction. For example, consider the Iron Workers Union’s contract. The winning contractor will have to pay into the union’s pension fund, annuity fund, health fund, apprentice fund, vacation fund, welfare fund, and other funds. In total, the contractor must pay $30.77 per work-hour to these funds for all employees, regardless of union membership! This is only one union; almost a thousand pages delineate jurisdictions and payments in this PLA.
When contractors have to pay into these fringe benefits for unions, there is less money to pay non-unionized workers. An in depth analysis by Dr. John R. McGowan of St. Louis University estimates that non-unionized workers get a 20% reduction in take-home pay under enforced PLA contracts. This is an outright affront to non-unionized workers.
The discrimination doesn’t stop here; minorities are also harmed by PLAs. Unions under-represent minorities, and such is the case in Philadelphia. Investigative journalist Tom Ferrick, Jr. reveals that minority membership in Philadelphia construction unions is 26%; which is a severe underrepresentation of the city’s 55% minority population.
PLAs also foot taxpayers with a larger bill as they drive up the costs of construction work with onerous stipulations and payments. Unions contend that PLAs reduce costs and disruptions, but studies from state to state indicate otherwise. For instance, a September study by the Beacon Hill Institute (BHI) concludes that PLAs increase costs by 12 to 18%. Numerous other studies on specific PLAs; commissioned by universities, non-profits, and agencies alike; corroborate the increased costs to taxpayers. Given the billions spending on public construction in Pennsylvania each year, the potential cost of PLAs to taxpayers is substantial.
The pandering to Big Labor cannot go unchecked in Pennsylvania, especially with everyone feeling the pain from this economic downturn. Pennsylvania spends billions of dollars on construction projects; it is imperative for lawmakers to act now and bar PLAs from any more construction projects. Unions, of course, can continue to compete alongside open-shops; they just shouldn’t get government preference. And most importantly, taxpayers should be taken off the hook for PLA kickbacks to Big Labor.