History and Hope: Union versus Open Shop
Editor’s note: In parts one and two of this series, Pat Kiley’s article Construction Craftwork as a Career has listed the “brutal facts” of the current state of the commercial construction craft workforce and given an account of the history of the industry over the past fifty years from his personal perspective. His series continues with an explanation of the decline of union shops with the rise of open shops in the Houston area.
Three things really sounded the death knell for the unions. The first happened in 1980. The National Building Trades Unions President, Robert Georgine, lead a successful effort to amend the 1976 ERISA (Employee Retirement Income Security Act) Laws and got the union pension funds, (into which contractors were contributing a defined, negotiated hourly contribution per covered worker), declared as “Defined Benefit Pension Plans.” This changed everything because it created an unfunded past service liability for each worker. This became known as “withdrawal liability.” It meant that for a contractor to withdraw from the union and work in the same geographic area, he must pay his company’s pro-rata share of any unfunded past service liability. The building trades’ president felt this unfunded liability that would need to be paid, if the contractor were to withdraw, would lock contractors to the union. Over time, it has had the exact opposite effect. No new companies have gone near unions, and as these funds became fully funded through investment performance and trustee diligence, companies withdrew in droves.
The second was an accumulation of non-productive crew mix requirements. For example, with the Operating Engineers Union, a light engineer, whose wage rate approached $20 per hour, was required to operate the man lift which involved merely pressing a button like you would on most regular elevators. As one contractor said, after returning from a jobsite visit, “When I got on the man lift and saw that guy sitting on a stool and pressing the button with a stick, I said that’s it; I am going to get away from these guys, no matter what I have to do!” Many others felt that way too, and between 1984 and 1990, the Houston AGC (Associated General Contractors) bargaining unit dropped from over 95 companies that assigned their bargaining rights to less than 10. (Houston AGC negotiates with the basic trades: Carpenters, Cement Masons, Ironworkers, Laborers, and Operating Engineers.) This drop coincided with a precipitous plunge in the commercial market volume during those same years; however, the AGC bargaining unit remains less than 10 contractors today. The National Electrical Contractors Association (NECA) and Mechanical Contractors Association (MCA), representing the licensed trades, still have relatively good size bargaining units, although also down form their size in the 70s and 80s.
The third issue was owner generated. It consisted of a productivity study of union construction initiated and paid for by the Business Round Table (today known as CURT, Construction Users Roundtable.) This was an association of the bigger corporations – many Houston area oil and chemical companies, the ship channel group, as well as those industrial plants along the coast belonged. A portion of their research took place at the Dow Chemical plant in Freeport, Texas. They found that that the union workers were productive about 50% of the hours they worked, with the combination of breaks, jurisdictional requirements, and disputes. These owners began to look at the bigger “open shop” contractors to build their plants: firms like BEK, Brown and Root, and Zachary. Over the following years, the Building Trades Unions responded with wage cuts and elimination of many of the “bad” requirements in their contracts, but their momentum was halted, and the building trades unions are all just a shadow of the size they used to be.
On the other hand, the Open Shop construction movement flourished from the late 70s on into the 90s. Contractors who converted from operating under the union agreements could provide their services more economically through a less expensive crew mix and more realistic ratios of journeymen to helpers. They could still maintain decent wages and a benefit package for their craft workers, most had some type of health insurance, and a few had some defined contribution (401K) pension plans. Open shop contractors, particularly after the downturn of the mid to late 80s, had ex-union, formally trained, experienced journeyman craft workers. They knew their trade and generally functioned as lead men, insuring daily productivity. They also trained helpers to become journeyman while on the job. Some formal open shop craft training programs were established by ABC (Associated Builders & Contractors) for both commercial and industrial trades. Construction craft work remained a viable career option for young Americans.
However, the late 80s and early 90s saw the start of a real change that haunts us today. Construction craft work as a career field began to be discouraged, first of all by parents who were construction craft workers themselves, and then by school guidance counselors. Fathers did not want their sons to do the same work they did, a complete reversal of the tradition of generational trade succession, which prevailed from the earliest days. Guidance counselors steered almost everyone toward college, toward computer science, toward anything but construction craft work. So over the years a labor shortage of traditional craft workers developed, and the use of immigrant labor began to fill the gap.
There were other challenges that accelerated the use of the increasingly abundant immigrant labor. Year after year, health care costs increased significantly. Employers were forced to drop their plans or ask workers to pay a larger percentage of the premium. That, in turn, caused many workers to drop their coverage. The plans were not portable either, like the union system plans had been. If a worker was laid off at one company, he often lost his coverage while he waited out eligibility at the new. Immigrant workers were not as concerned about health care benefits. They did not expect employers to provide it. Over the past 25 years, immigrant workers have grown to where they now make up the greatest percentage of the workforce, particularly with the basic trades, as health care costs continue to skyrocket. As a result, there are now few open shop craft workers with health care coverage.
Another issue developed with the continuity of formal open shop training programs, especially for commercial craft workers. Commercial jobs have a shorter cycle than industrial; many jobs last only a few months. If the current employer does not have another job for the craft worker who is in training, the worker is laid off, which typically stops his training, or he goes to another employer, who may not be willing to support his training. As a result, most centralized, third party commercial training programs have failed, while the industrial training programs have been sustained. (Longer cycle jobs and plant owner requirements make industrial training programs viable). Commercial craft worker training is done today, if at all, through in-house programs by individual companies, or by a variation of the old-fashioned guild system, where an individual is “apprenticed”, informally, to a journeyman.
Next week the series will conclude with History and Hope: Fifty Years Later C3 Gets It Right
Construction Craftwork as a Career, part 3 of 4
History and Hope: Union versus Open Shop