Knowing the Benefits of Both Union and Non-Union Employees

Contractors should look at all the pros and cons to union and nonunion workforces when deciding which route to take.

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Once a stronghold of the middle class, labor unions have seen a steady decline in membership, particularly in the private sector — including in the construction industry.

According to the U.S. Bureau of Labor Statistics, total union membership in 2015 was approximately 40 percent less than what it was in 1983, and the percentage of construction workers who are union members dropped 4 percent to 13.2 percent between 2002 and 2015.

Why have unions seen a downturn in recent years? And what factors should commercial plumbing contractors consider when deciding between union and nonunion labor?

LOOKING AT THE EXPENSE

The primary impetus behind this shift is the expense. Using union versus nonunion labor can mean a 20 percent reduction in profits, according to David MacPherson, professor of economics at Trinity University in San Antonio. “I cannot think of a single economic study that has not found that unions lower profits,” he says. “So unless union workers are at least 20 percent more productive, they’re going to hurt profits.”

Furthermore, the additional cost of using union labor can be as much as 33 percent but normally falls between 20 and 25 percent, notes Thomas Baylis, partner at the law firm Cullen and Dykman in New York, a market that still has a strong union presence. Baylis notes that virtually all the large projects like airport expansions, skyscrapers, wastewater treatment plants, and ground-up schools are still union in New York and certain other markets like Boston and Chicago. But he added that many markets, particularly smaller cities and more rural areas, have little or no union presence.

A big part of why union wages are so high rests with the fringe benefits package that can be as expensive as the wage rate itself. While the package is lofty for members, it makes it virtually impossible to be competitive with such rates when competing against nonunion contractors.

DIFFERENT OPPORTUNITIES

The advantage of being a union plumbing contractor is it opens the door to take on projects that only other union contractors have access to. “To really grow and get involved with big projects in New York, you have to be a signatory (union) contractor,” says Mike Morena, director of purchasing at Cardoza Plumbing, a Westbury, New York-based union plumbing contractor.

The unions and unionized employers argue that union laborers are more skilled and safer than nonunion laborers and that it is far easier to mobilize large numbers of workers when they are organized.

Most plumbers unions have an apprentice program with a strong emphasis on training. The idea is for contractors to invest in individuals by having them partake in several years of trade-specific and safety training. Upon graduating from an apprentice program, which typically takes 4-5 years, the individual becomes a journeyman, who is paid significantly more than an apprentice. If, however, there’s a lull in work and the contractor must lay some labor off, that multiyear investment could be for naught if the worker accepts a position with a different contractor.

Collective bargaining agreements also spell out very specific guidelines in terms of what members can and cannot undertake. As Larry Haney, vice president at R.E. Robertson Plumbing, Heating & Air Conditioning in Annapolis, Maryland, notes, work ebbs and flows, and employee flexibility can mean the difference between holding on to someone and laying them off. “We have a very good core of professionals, and we do what we can to keep that intact,” Haney says. “That may mean a plumber helps out on a large AC project, or an HVAC guy may need to take on the role of delivery man for a day. When you’re a small business everyone needs to be mobile and wear multiple hats, so working within a defined set of rules simply wouldn’t work for a business like ours.”

Union contractors also have other commitments that are required under the agreements, like filing certified payrolls on a weekly basis.

THE LABOR POOL

A key advantage to being a union contractor is the access to a large pool of labor. “If we get real busy and need to add some plumbers to cover all the work, all we need to do is pick up the phone and call the (union) hall,” Morena says. “If we’re not happy with a particular person, they can be easily replaced, and if things slow up, we have the ability to lay off some people.”

But all that jockeying of labor also requires tight management on the part of the contractor. Morena acknowledges that good foremen are necessary to ensure everyone remains productive on job sites.

In major urban areas, most union plumbing contractors are either large organizations that are well capitalized and have the horsepower to take on projects of all sizes or are niche contractors that focus on specific types of work that tends to be union, like hospital renovations or sewage projects. Union contractors generally agree that it’s important to carve out a well-crafted business plan before even considering becoming a signatory contractor.

“Signing a collective bargaining agreement is a major commitment,” Baylis says. “If you’re in a union-heavy market, can foster the right relationships, and know how to navigate the labor and paperwork, it can mean access to work with less competition,” he says.

“But there’s a lot of nonunion work out there — even in major union markets — and you have to be fully committed that it’s the right move for your business.”



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