Report: Project Labor Agreements Have Cost New Jersey Taxpayers Half a Billion Dollars Since 2002
Beacon Hill Institute: Project Labor Agreements (PLAs) for government infrastructure construction have cost New Jersey taxpayers more than half a billion dollars by inflating the cost of government construction projects.
Project Labor Agreements (PLAs) for government infrastructure construction have cost New Jersey taxpayers more than half a billion dollars by inflating the cost of government construction projects, states a report by The Beacon Hill Institute for Public Policy Research.
PLAs are pre-hire collective bargaining agreements that establish the terms of employment for a certain construction project. New Jersey’s Project Labor Agreement Act, enacted in 2002, requires contractors to adhere to specified work rules and hiring procedures for certain public works projects with total costs of $5 million or more—which must be covered by a PLA.
“New Jersey taxpayers would have saved $565.1 million, or more than $7.1 million per project, in 2018 prices, if PLAs had not been used,” stated the BHI study, released August 26. Based on a statistical analysis of 107 schools constructed in New Jersey since 2002, the study found that PLAs drove up the price of construction projects by 12 percent to 18 percent.
A total of 25 states have enacted legislation restricting government-mandated PLAs, while eight states have passed measures encouraging their use on taxpayer-funded construction sites, the BHI report states.
‘End Fair and Local Competition’
The New Jersey findings are similar to results for other states, says David G. Tuerck, president of BHI and co-author of the report.
“This study echoes previous BHI analyses of the impact of PLA mandates on school construction in Connecticut, Massachusetts, and Ohio, which found PLA requirements increased the cost of construction compared to projects without PLA mandates,” Tuerck stated in a BHI press release on September 23.
“Opponents of government-mandated PLAs argue these controversial agreements end fair and local competition and discourage local nonunion contractors from working on projects in their own communities, which effectively limits competition during the bidding process and drives up construction costs,” Tuerck said.
PLAs typically require all contractors to hire most or all workers through union halls or apprenticeship programs, and nonunion workers must join a union and/or pay union dues for the length of the project. In addition, a PLA ensures that union work rules, job classification, and dispute resolution process apply to the project.
Requires Union Pension Fund Contributions
PLAs require contractors to contribute to union benefit plans on behalf of employees, but those contributions are forfeited unless the workers join a union and become vested.
Thus, PLAs limit competition for government contracts to construction workers who are unionized, says Stan Greer, senior research associate at the National Institute for Labor Relations Research and a policy advisor to The Heartland Institute, which publishes Budget & Tax News.
“Under union-only PLAs, independent construction workers who already have their own retirement accounts are nevertheless forced to contribute to Big-Labor-managed pension funds,” Greer said. “Rather than compromise the freedom of their employees and the efficiency of their operations, most independent construction firms simply refuse to submit bids on PLA projects.”
In 2018, 87.2 percent of U.S. construction workers and 77.9 percent of New Jersey construction workers chose not to join a union, the BHI study states.
Discriminating Against Nonunion Workers
PLAs put unionized workers in a privileged position, says Trey Kovacs, a policy analyst at the Competitive Enterprise Institute.
“It is well documented that PLAs drive up costs, but they also discriminate against nonunion construction workers,” Kovacs said.
“Requiring union labor on taxpayer-funded construction projects actively excludes the majority of the construction workforce. In New Jersey, only 22.1 percent of construction workers are members of a union,” Kovacs said.
“It is puzzling why any government would blatantly cater to such a small percentage of the state’s workforce, especially when PLAs increase the cost of construction and extend project schedules,” Kovacs said.
Bonner R. Cohen, Ph. D. (firstname.lastname@example.org) is a senior fellow at the National Center for Public Policy Research.
William F. Burke and David G. Tuerck, “The Effects of Project Labor Agreements on Public School Construction in New Jersey,” report, The Beacon Hill Institute, August 26, 2019: https://www.heartland.org/publications-resources/publications/beacon-hill-institute-the-effects-of-project-labor-agreements-on-public-school-construction-in-new-jersey