Construction Unions Can Help Solve A $40 Billion Dollar Problem
The construction industry is waking up to the fact that, when it comes to labor, you get what you pay for. While untrained, non-union workers may appear cheap on an hourly wage basis, their lack of skill and experience can lead to inefficiencies that result in a lower quality build and higher overall costs. This has been borne out in a number of recent studies. The latest, conducted by FMI Corp, quantifies the cost of labor inefficiency to the overall construction industry — the numbers are staggering. Fortunately, New York City construction unions point the way toward a solution.
The $40 Billion Dollar Problem
FMI Corp is a leading construction consulting and investment firm. They bankroll big projects and perform research that developers and contractors use to make their projects more efficient. Their latest study on labor productivity uncovered a statistic that should set off alarm bells throughout the construction industry: contractors have wasted $30 to $40 billion on labor inefficiencies in 2022 alone. And the problem only seems to be getting worse in 2023. The root cause of these costly inefficiencies? Nearly two-thirds of contractors surveyed reported that a lack of qualified craft labor is the number one internal factor impacting productivity. The growing shortage of skilled construction labor has been widely documented, this study shows the profound cost it’s having on the industry.
While many big developers hate unions, we can only hope that they hate losing money even more. It’s becoming clearer each day that union labor is cheaper and more efficient.
Unionized Construction Offers A Way Forward
The findings of the FMI Corp study resound with other recent studies, reported on by Union Built Matters, that reveal how employing union contractors can reduce waste caused by labor inefficiency. The findings of these studies run counter to the narrative, promulgated by non-union supporters, that union labor is more expensive.
An Independent Project Analysis (IPA) study from earlier in the year demonstrated that, even though union workers receive better pay and better benefits, union-built projects are actually cheaper. The secret lies in the efficiency of union construction driven by reliable, highly-trained workers. On a union jobsite, there is less labor turnover (a major source of friction and inefficiency), a reliable pipeline for sourcing new skilled labor, and much higher rates of labor productivity. Union crews also experience fewer fines, work stoppages, and lawsuits due to the rigorous safety standards and professionalism of union tradesmen. The net union result? More labor efficiency, less waste.
Before a construction worker can earn a union journeyman license, they must complete an apprenticeship that often requires thousands of hours of on-the-job training as well as hundreds of hours of classroom learning. Union workers are New York's most thoroughly trained and experienced construction talent.
Meanwhile, a study out last month by Cornell University's ILR Worker Institute focused on prevailing wage jobs revealed the secret weapon behind labor union’s efficiency: apprentice power. Unions sponsor apprenticeship programs that create a pipeline of top-shelf construction talent with thousands of hours of rigorous on-the-job training. The non-union sector, on the other hand, has no such programs.
The power of union apprenticeship programs can’t be overstated. Not only can union contractors cut labor costs for builders by employing up to 40% apprentice labor, they are training the next generation of highly skilled tradesmen. In an industry plagued by a skilled labor shortage brought on by the retirement of experienced workers, these training programs are crucial if we plan to continue building America into the future.
Unions also require annual training hours for their members to maintain safety qualifications and knowledge of the latest work materials and best practices.
Industry Observers Are Scratching Their Heads
Given the labor dynamics in the construction industry, and the staggering cost of employing inefficient, unskilled workers, many industry observers are left scratching their heads. Why are construction unions— who are verifiably more cost effective and have a sustainable pipeline to the most highly trained tradesman in the world — still fighting tooth and nail to win bids against non-union contractors?
One theory, put forward by a construction estimator and covered in more detail here, is that non-union developers are flat-out lying when they bid on projects. There are many ways they can play games with the numbers, including not assigning the proper number of workers or specialties needed, and “misclassifying workers — planning on concrete guys doing jobs that aren’t concrete, and things like that.” If this is the case, it’s no wonder the industry is hemorrhaging tens of billions of dollars every year due to labor inefficiency.
Another theory has to do with control over the project. Big developers can push non-union workers and contractors around in ways that they can’t with unionized labor. Developers perceive that they will have more control over timing and labor costs if they go with non-union. But that labor choice seems to be costing them billions.
While many big developers hate unions, we can only hope that they hate losing money even more. It’s becoming clearer each day that union labor is cheaper and more efficient. With the skilled labor shortage pressuring the industry from all sides and the cost of labor inefficiency skyrocketing, it’s time developers wake up and start giving construction unions a fair shake.
Mark Colangelo is a writer and blogger.
Get Our Monthly Newsletter
Stay up to date on what's happening in New York construction. Our news comes from major media publishers, real estate and construction trade insiders, and the people involved in the industry every day. And it's free.
