by Lance T. Izumi, Fellow in California Studies
Pacific Research Institute
February 10, 1998

Announcer lead: Time for Perspectives. Lance Izumi says that union-only government contracts hurt the taxpaying public.

One of the most alarming trends in California today is the increase in the number of union-only construction contracts being negotiated by local governments. Under these contracts, which are called "project labor agreements," firms that use non-union labor are shut out from the contract-bidding process. The disturbing result has been that the benefits of open competition are not accruing to taxpayers who are being asked to cough up billions of dollars for public construction projects.

Union-only contracts now cover some of the most expensive local government projects in the state. There's the $2 billion renovation of San Francisco airport; a $2 billion reservoir system in Southern California; a $450 million water system in Contra Costa; and a $200 million light-rail project in Sacramento.

For their part, the unions claim that union-only contracts assure quality workmanship, increase safety, and reduce cost. Yet, a recent study by University of Pennsylvania Professor Herbert Northrup and labor attorney Linda Alario demolishes these myths. According to Northrup and Alario, the record of non-union construction firms clearly demonstrates that they "can and do successfully perform and manage large projects." Further, their study found that the fatality rate for non-union construction workers was much lower than the rate for unionized employees. Finally, Northrup and Alario found that union-only government contracts increase costs because they lock in union staffing rules, rigid personnel regulations, and pay requirements. Non-union firms, on the other hand, can deploy workers more flexibly, train them more rationally, and construct market-determined wage and benefit packages. All of this gives non-union firms a comparative efficiency advantage.

The bottom line is that the basic rules of Economics 101 still apply: Free and open competition keeps quality up, keeps costs down and, in the case of public contracts, ensures that the interests of the taxpaying public, not monopolistic union bosses, are given priority.

With a perspective, I'm Lance Izumi.