WSJ: NYC construction unions 'losing their grip' on private market

Dive Brief:

  • Major New York City construction companies like Tishman Construction and Turner Construction have passed on renewing certain collective bargaining union labor agreements for private work, indicating they’re planning to use less expensive nonunion workers on future projects and that unions in the city are "losing their grip" on the market, The Wall Street Journal reported.
  • A New York City Independent Budget Office report earlier this year found that that paying union scale on Mayor Bill de Blasio’s planned affordable housing projects increased costs by 23%, while developers for other private city projects have said using union labor raises costs by 20% to 30%.
  • Even though the number of union-exclusive private projects is dwindling in favor of open-shop models, union officials said their presence is still strong in the public sector  a $13 billion market in New York City last year.

Dive Insight:

Other union strongholds like Chicago are also seeing a loss of union market share in private work, according to The Journal. Unions saw their pinnacle in the 1950s when 50% of all construction workers were union members, and the labor groups enjoyed a 35% market share in the private sector. Construction unions are starting to feel the pinch. For example, in a period of startling growth in the city, New York City and Vicinity District Council of Carpenters clocked only 21 million hours in fiscal year ending June 2015, a 13% decline from the city’s previous 2008 boom total of 24 million hours.

Part of the unions' justification for higher wages is that their workers provide a higher quality and safer product than their nonunion counterparts. However, a new industry group, the New York Construction Alliance, which is made up seven open-shop construction firms with more than $1.5 billion in revenue last year, is out to dispel that notion. 

In addition to the higher rate of pay, some construction company executives and developers say the union way of working hasn’t kept up with the competition, particularly when it comes to which workers are allowed to perform certain aspects of the work.

In a recent New York City union dust-up, the Building and Construction Trades Council and the Real Estate Board of New York failed to firm up a wage agreement for potential workers on de Blasio’s 80,000-unit affordable housing plan, which resulted in the expiration of the 421a tax credit. The 421a credit, which offered a tax break to multi-unit residential developers who included affordable units in their projects, was expected to generate approximately $1.5 billion in tax breaks.

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Filed Under: Commercial Building Residential Building Legal/Regulation
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