Tag Archives: construction

AB 219 Closes Wage Loophole on Public Construction Projects

By Steve Smith

California has long been committed to ensuring that anyone employed on a public works construction project earns a living wage. That just means the wages paid to women and men who build the public structures we all use aren’t driven into poverty. The wages are set by region based on cost of living and other factors to ensure that both workers and taxpayers are protected. It’s this kind of stability and fairness that ensures these important projects are completed on time by skilled professionals who do the job right.

But, like with many laws, there are loopholes. Drivers of ready-mix cement trucks who are employed by manufacturers are not covered under the state’s prevailing wage law, meaning those drivers don’t receive the same fair wages that other drivers doing the exact same work receive.

We’ve all seen a line of cement trucks preparing to pour on a construction project. Imagine that the first and third drivers are receiving a fair wage as required by law, while the second and fourth are receiving a substandard wage that makes it extremely difficult to support a family. Because of a loophole in the labor code, this isn’t just a theoretical scenario. It plays out daily on construction projects throughout the state. As a result, public dollars are used to suppress the pay of hard-working men and women without rationale.

But today, the state legislature took an important step to rectifying this inequity by voting to close the loophole with AB 219 (Daly) so that all cement truck drivers working on public projects earn the same fair wage.  Earlier this week, dozens of workers from the State Building and Construction Trades unions and the Teamsters lined the halls of the Capitol to urge legislators to close this loophole and support good jobs. Their message was simple: all workers on a construction site deserve fair treatment on the job and a decent wage to support their families.

While passing this bill may seem like a no-brainer to most, it’s no shock that corporate lobbyists were coming out of the woodwork to oppose. Some big corporations like the loophole because it allows them to underbid responsible contractors who do the right thing by paying their employees a decent wage and offering healthcare and retirement benefits.

While there will always be corporations who try to get around the spirit of the law to cheat workers and pad their own bottom lines, taxpayers shouldn’t subsidize this inherently unfair practice. When workers are mistreated, it endangers the entire project. It’s in all of our best interest to ensure that workers doing the exact same work earn the same pay.

Governor Brown now has the opportunity to close the labor code loophole that treats workers differently solely based on who their employer is. By signing AB 219, the Governor would ensure that public works projects are completed by skilled professionals who earn a decent wage for a hard day’s work.

STUDY: Prevailing Wage Adds 17,500 Jobs to California Economy

Prevailing Wage policies add 17,500 jobs and $1.4 billion in output across California’s economy, according to a new study released by Smart Cities Prevail – a leading construction industry education and research organization.  

Entitled, Building the Golden State-The Economic Impacts of California’s Prevailing Wage Policy, the first-of-its-kind report was co-authored by Colorado State University-Pueblo Economist Dr. Kevin Duncan and Smart Cities Prevail Researcher Alex Lantsberg. The study was conducted using IMPLAN software (the industry standard for analyzing the effects of government policy choices on the economy) to model the impact of eliminating California’s prevailing wage standards.

In addition to measuring the policies’ impact on job creation and overall economic output, the study also concludes that prevailing wage policies facilitate broad improvements to the construction industry as a whole–including substantial reductions in materials waste and dramatic increases in both local hiring and overall workforce productivity.

To Download the Full Report, Click Here.

“While past research has already concluded that prevailing wage promotes workforce development, safer job sites, less dependence on public assistance, and has only negligible impacts on project cost, these new findings show the value of these standards both to the construction industry and our economy as a whole,” said Dr. Kevin Duncan.  “From creating jobs to increasing efficiency, it is clear that prevailing wage policies provide taxpayers with a far better return on investment than the less beneficial alternative.”

While California has recently enacted new legislation (SB 7) to encourage more of its cities to enact prevailing standards, several other states-including Nevada, Wisconsin, Indiana, and Michigan–are either considering or have recently passed laws to weaken prevailing wage requirements on public works.

“This study provides important context for the recent changes to California’s prevailing wage laws, but also for the debates that are happening in other states across our country,” Lantsberg said.  “The data shows that the decision to weaken or eliminate prevailing wage is a choice that can increase poverty, export more tax dollars out of state, and eliminate thousands of jobs in the process.”  

Lantsberg added, “It’s important to note that this study focuses on the benefits of the state prevailing wage policy, but does not analyze the additional positive benefits that come from federal and local policies.  For example, the state and federally funded high speed rail project in California is estimated to create 20,000 prevailing wage construction jobs in the first 5 years of construction, and tens of thousands more in the years that follow.”

Consequences of Prevailing Wage Elimination in California:

– Gross job losses of 48,500 and net job losses of 17,500

– 3%-5.5% increase in out-of-state contracting

– State Economic output reduced by $1.4 billion

– Real income reduced by $1.5 billion

– More construction professionals living at or near the poverty line.

– 12% decline in workforce productivity and 5% increase in materials waste

Kevin Duncan, Ph.D. is a nationally recognized economist specializing in labor and regional economics.  Dr. Duncan currently works as a Professor of Economics in the Hasan School of Business at Colorado State University – Pueblo and Senior Economist at BCD Economics, LLC.  he teaches regional economics where his students learn economic impact analysis.

Alex Lantsberg is a researcher with Smart Cities Prevail specializing in economics, land use, and urban planning.  Mr. Lantsberg holds a Master’s Degree in City Planning from the University of California, Berkeley and an undergraduate degree in finance from Northern Illinois University.

Prevailing Wage is the standard rate paid on publicly funded projects to a worker in a given trade, in a given region.  Prevailing wage laws were first established federally and in some states in the 1930s – and supported by leaders from both political parties – in order to raise the quality of government funded construction projects and encourage more local hiring.  

Smart Cities Prevail is a non-profit 501(c)(4) organization and California’s leading research and informational resource on prevailing wage.   For more information, visit www.smartcitiesprevail.org.


If off-shoring of manufacturing burns you up, so should the elimination of prevailing wages in construction

For years we’ve been hearing about the devastation caused by the off-shoring of manufacturing capacity.  Families that were firmly in the middle class experienced dramatic declines in their standards of living as their jobs were shipped off to a far off location where the work would be done at a fraction of the cost because the CEOs could pay workers a pittance while evading the costs of keeping the air and water clean.  When the left-behind workers found new jobs, the wages and benefits were nowhere near what they had lost.  As families became poorer, communities suffered as their coffers emptied because residents had far less to spend back in town.  Entire industries and the technical know-how of their workforce have disappeared in the United States.

All of this has rightfully made many Americans angry.  But while the most noticeable impacts of off-shoring have been concentrated in a few states in the industrial Midwest, the elimination of prevailing wages in construction has the potential to bring these problems to California.  At first blush the comparison between construction and manufacturing does not seem to fit.  However a deeper look at the construction industry, its hiring practices, its skill base, and the stabilizing role of prevailing wages shows that the comparison is right on target.  

Two defining characteristics of the construction industry are its seasonality and impermanence. Major work is typically scheduled to occur between the spring and autumn to take advantage of the weather, with significant downturns in the winter months.  These are challenges for both contractors and the men and women they employ.

For contractors the stakes are extraordinarily high.  Since the level of work waxes and wanes, a contractor cannot simply carry a large payroll when there’s no work.  Instead, they need to be able to “hire up” to meet their workforce needs when times are good and scale back when they’re not working.  When the time comes to bid on a major public works job they need assurance that they can fill their labor needs with skilled workers who can do the job quickly and do it well.

Construction workers, especially those working in smaller markets, face the flipside of the contractors’ problem.  Since work is irregular they often have to earn enough in those eight months to get them through what are virtually guaranteed lean times.  And because construction projects eventually come to an end with the next job far from guaranteed these workers need an incentive to stick with the industry when the tide is out.  

Prevailing wages serve that stabilizing role for the industry by ensuring that skilled construction workers are able to earn a decent wage that will carry them through a year’s ups and downs and accrue health, retirement, and vacation benefits that give them a measure of security.  Training payments, which are part of most prevailing wage determinations, are invested into programs – both union and non-union – that enable workers to upgrade their skills and also prepare new apprentices for careers in the building trades.  This structure maintains the skill base needed to build public works to exacting specifications and develops a pipeline of skilled workers to replace those aging out of the industry.  And even more important for local communities, it maintains a tax base that supports the general funds that provide much needed public services for our cities.

Eliminating prevailing wages invites out of area contractors that don’t have to compete based on local standards and undoes this web of mutual relationships, thereby undermining the entire construction industry’s long-term stability.  This sets off a chain reaction that mimics the dynamics we’ve seen in the industrial Midwest with one crucial difference.  While new industries can arise to take the place of those that have left, construction must by its very nature remain localized.  Without strong standards the industry becomes caught up in a downward spiral that drives down incomes for local construction workers and pushes skilled craftspeople away in search of a stable livelihood, destroying the industry’s skills base and ultimately dragging our local economy down with it.

California communities don’t have to go down this road.  By maintaining prevailing wage standards Cities will support their local construction industry and their local economies and avoid the disinvestment and devastation that has wrought such damage on the nation’s industrial heartland.

On Determining Impact, Or, How Stimulative Is Stimulus?

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We strive to be, if anything, a participatory space around here, and I’ve had a question come to my inbox that is very much deserving of our attention.

To make a long story short, our questioner wants to know why, on the one hand, despite the passage of the American Recovery and Reinvestment Act of 2009 (ARRA, also known as the “stimulus”), unemployment in the construction industry continues to increase, and, on the other hand, why there is such a giant disparity, on a state-by-state basis, in the cost of saving a job?

They’re great questions, and, having done a bit of research, I think I have some cogent answers.

A few facts will help set the stage:

I post on numerous sites, one of those being Blue Oklahoma, and about ten days ago I received an email from a reader who wanted me to know that he had data up regarding how effective stimulus dollars are at creating construction jobs.

He also wondered if I would be willing to blog about his work, which is itself posted in the form of a blog, with handy charts and graphs; I’ll quickly summarize what he had to say for your dining and dancing pleasure:

Although the goal of the stimulus was to create construction jobs, today’s data suggests that roughly 10 times as many jobs were lost in the construction industry in the recent past 12 months (September 2008 – September 2009) than were created by the stimulus efforts this year to date.

“The major question surrounding the ARRA and the construction industry on this reporting deadline is: How many construction jobs has the stimulus bill actually created or retained?

–Chris Thorman, State by State: Is the Stimulus Bill Creating Construction Jobs?  [emphasis is original]

In the blog he reports that if you were to go to the Recovery.gov website, download the state summary data located there, and then do a bit of quick math, you’d find that:

“…the ARRA has created or saved 73,352 construction jobs across the nation at a total cost of $15.8 billion since the bill was signed into law.

That’s $222,107 per construction job.”

He has also created a chart, that is intended to show, on a state-by-state basis, the cost per job-and there is enormous variation in the results, from a low of $47,536 in Minnesota to a high of $535,171 in California.

As a result, he’s come to this conclusion:

“Jobs are being created and saved but nowhere near a rate that will allow the stimulus bill to claim victory over construction unemployment.”

So the question for us becomes: how solid is his analysis?

In order to get a better answer, I decided to examine some of the underlying data supporting his conclusions-and to put it as gently as possible, the numbers that we’re seeing today are a bit…squishy.

There are a couple of reasons why, which, naturally, require a couple of quick explanations. (This is a “quick and dirty” education; there are exceptions to some of what you’ll see described below.)

Right off the bat, it appears that identifying exactly how many jobs are being saved is more difficult than it seems-but before we can really understand that, we need to take a moment and understand exactly how jobs are counted.

If you work 40 hours a week, which is the equivalent of a full-time job, you would equal one (warning: technical term ahead) “Full Time Equivalent”, also known as an FTE. Two people, each working 20 hours a week, are also one FTE, as are any other combinations that you can come up with that get you to 40 hours a week. From here on, when we use the word “jobs”, we also mean FTEs, and vice versa.

The rules of the stimulus program are unique unto themselves, and one of the unique rules, at least for the moment, is that overtime hours don’t count when counting FTEs; since we’re talking about the number of construction jobs the stimulus might be creating, and about 25% of construction jobs involve overtime work, this rule is probably distorting the outcome.

States are also having problems translating FTE tracking systems they already have in place into the new Federal FTE definitions being used to figure out how many jobs are being created with stimulus funds.

An example of this problem is laid out in a document from the University of Connecticut (UConn) describing how their FTE reporting is going. The State FTE tracking system uses “cumulative” reporting, the Federal system, “incremental” reporting; the only thing you need to know about the two systems is that, quoting from the report:

“…At no time would the state and federal FTE figures match.”

There’s another issue in play here: this is a brand-new bureaucracy, and everyone is still “finding their way”, on both the State and Federal sides. Here’s another quote from the same UConn progress report:

“Note #2: We have experienced challenges in reporting, primarily with formatting issues. Solutions include working directly with OPM (the State’s Office of Policy and Management) and the respective OSPs (the University’s Office for Sponsored Programs) to enhance timeliness and formatting accuracy. The reports submitted June through September 2009 were definitely part of the learning process. Currently, we are working directly with the respective OSPs to ensure the correct reporting templates are used for state reporting purposes.

Put all that together, and you have a collection of “structural” issues that will probably cause the “real” construction FTE numbers to be somewhat different from today’s “reported” numbers by some currently unknown amount that can probably be “estimated out” later on.

The biggest distortion in statistics, however, is a “timeline” issue, and it’s because trying to estimate the “cost per FTE” at the beginning of construction projects is inherently problematic.

To illustrate this point, let’s drill down to one individual project and see how things work:

Award number OK56S09550109 was granted to the City of Shawnee’s Housing Authority to modernize the HVAC (Heating, Ventilation, and Air Conditioning) system at a public housing development. The current reporting is that $856,585 was awarded for the work, for which 2.5 FTEs have been reported.

However, as of the reporting date only $61,674 has been expended (or $70,084–both numbers appear on the same webpage); that money going to Childers-Childers, Architects.

The 2½ FTEs are .5 each of two administrators and 1.5 architects.

Obviously there will be more jobs created as this project moves from design to construction, and the estimate of roughly $340,000 per FTE that could theoretically be cited as accurate today will no longer be valid once a bunch of people show up and actually start installing stuff.

In fact, it could be reasonably argued that the “correct” number is $24,669 per FTE (or $28,034), based on the amount expended and jobs created to date.

This “timeline issue” is a statistical problem that Thorman himself acknowledges in his blog:

“With 73,352 jobs created/saved during this reporting period, the number will undoubtedly go up in future months as more projects begin and as more projects enter more labor-intensive phases. The construction jobs created/saved by the stimulus will likely get better before they get worse.”

(Just for the record, a third method you could use to count FTEs would be to divide total grant awards against total estimated construction employment throughout the lifetime of these projects.)

You may recall that the reason we’re having this discussion is because we are trying to come to some conclusion about what impact the stimulus is having on creating jobs-or, alternatively, creating even more geeky FTEs.

Well, having looked at the thing all the way down to the individual project level, it may be that the best answer that’s available…is that there’s no answer yet available.

With that in mind, my conclusion is that we will need some time to create a large enough “statistical universe” of completed or nearly-completed projects before we can begin to make useful extrapolations about the stimulus’ future success, and my guess is that it will be six to 12 months before that threshold is reached…which means I have no idea whether the stimulus is creating or will create a sufficient number of construction jobs relative to its budget, and It may well be summer of 2010 before we do know.

And that, my fellow political observers, has the potential to make the ’10 Congressional midterms very, very, interesting.

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An Evening With Some Community Organizers

Last night I had the pleasure of attending the 15th Anniversary Awards Dinner for LAANE (The Los Angeles Alliance For A New Economy), which brought 1,000 people to the Beverly Hilton (including Mayor Villaraigosa, Sean Penn, and more) and raised $500,000 for their cause.  I know I get depressed reading about endless budget fights and cutbacks to schools and health care, so it’s important to take comfort (and some valuable lessons) in those doing important work – and fighting some of the most powerful and entrenched interests in the city and the country – and winning.

LAANE is a group dedicated to fighting for economic and environmental justice by building coalitions and waging campaigns to improve the lives of people in underserved and at-risk communities.  Their success stories include some of the most astonishing victories of the last decade – the living-wage campaign in Los Angeles, the (eventually) successful grocery worker’s strike, the campaign to keep Wal-Mart out of Inglewood in 2004, the fight for justice for hotel workers near LAX.  More recently, they achieved success with a landmark blue-green alliance of nearly 40 environmental groups, community organizers and labor organizations like the Teamsters, to clean up the Port of Los Angeles, which resulted in a huge victory for clean air and clean water which will also provide good-paying sustainable jobs for truck drivers.  The Coalition for Clean and Safe Ports is a model for the nation, to combine economic security and respect for the environment at the ports, and Chuck Mack & Jim Santangelo from the Teamsters were honored last night (sporting leis flown in by a Teamster rep from Hawaii).

Another of their campaigns is the “Construction Career Policy,” dedicated to providing local residents in low-income communities the opportunity to get middle-class, union construction jobs on projects happening in their area.  This has resulted in thousands of jobs for at-risk and underserved communities of color, and the goal is for 15,000 jobs over the next 5 years.  Mayor Villaraigosa presented Cora Davis, a construction business owner and leading advocate for the program, with an award.

Finally, in the wake of the movie “Milk,” many are remembering the work of Cleve Jones, an activist in San Francisco during the era and the leader of the AIDS Quilt Project.  Today, Jones is a community organizer working for UNITE HERE, and he has worked with LAANE on their campaigns to create living-wage jobs and improve working conditions for the 3,500 hotel workers around LAX Airport.  Sean Penn, who became friendly with Jones over the last year working on “Milk,” presented him with an award for his service.  In his speech, Jones talked about these noble working-class people, many of them immigrants, “the ones who are serving you dinner tonight,” and he paid tribute to their struggle and dignity.  He also had a few words to say about the passage of Prop. 8, which left him heartbroken and drew eerie parallels to the Prop. 6 campaign he worked on with Harvey Milk in 1978.  But, Jones said, the real parallel moment is 1964, a time when civil rights for African-Americans in the Deep South appeared remote.  “Now is the time for Barack Obama and Nancy Pelosi and Harry Reid to sign a new Civil Rights Act restoring fundamental rights for every American in this country.”  It’s not the tactic you hear from the leading gay rights organizations, but Cleve doesn’t hold much of a brief for them either:

The new (gay rights) activists have impressed some gay rights veterans.

“They’ve shown a clear ability to turn out large numbers of people,” said Cleve Jones, a longtime gay rights advocate and labor organizer. “It’s also clear that they are skeptical of the established L.G.B.T. organizations. And I would say they have reason to be.”

Overall, it was inspiring to see a community-based organization so dedicated to restoring fairness, justice, dignity and respect to a part of a population that frequently doesn’t have a voice in political affairs, and more important, to see them get results.  LAANE is doing some great work.