Union construction companies, once the dominant builders in New York City, have been forced to cut wages and benefits to compete with the cheaper non-union firms that have increasingly elbowed their way into the metropolitan marketplace.
After the recession of 2008, developers looking to build in the city were presented with a choice: use union workers and pay more or spend less with non-union labor.
It was an easy decision to make — to build non-union was to spend about 30 percent less on construction costs. Many developers could not resist the savings. Unions can build faster but low non-union wages make up for the lost time.
“The issue comes down to one thing, and that’s cost,” said Louis Coletti, president of the Building Trades Employers’ Association, a group that represents unionized contractors.
Data collected by Coletti’s association shows that non-union firms first made inroads into the New York City market through smaller outer-borough job before they moved on to larger Manhattan-based projects.
Last year, non-unionized companies secured 55 percent of the jobs from 20 and above, up from 35 percent in 2014, Coletti said.
“Unions excluded smaller projects, non-union contractors built them up and next thing you know they’re in Midtown Manhattan. Now every building is a battle,” said Ed Ott, a labor expert.
For unions to survive they’ve had to cut costs by slashing wages.
So-called “Market Recovery Rate” wages baked into new labor agreements lower pay by 20 percent. Benefits have been reduced in some cases. Cutbacks anger unionized workers but labor leaders argue that there is no other way to secure new job contracts.
“They understood that they were losing the marketplace, but the other option is that they wouldn’t be getting jobs,” Coletti said. “All you have to do is walk down the street in Brooklyn or Manhattan and see the number of nonunion buildings going up, and that is a stark reminder.”
Unions have tried to drive down costs by making a lower-tiered category of workers below the traditional classes of apprentice and journeymen. The less-trained new hires do the routine menial labor, like loading and unloading trucks, that allows a job site to function.
They go by different names depending on the trade — helpers, residential wiremen, utility workers, material handlers — but the concept is simple enough: staff a job with enough of these low-skilled workers and the average cost of labor on a union job bid decreases.
Older workers may soon sour on the new hires if the city’s current building boom dies down, however. The city has seen over a 300 percent increase in construction volume in the last six years but the expiration of the 421-a tax break caused an 80 percent drop in newly permitted floor space by the end of 2016.
Union leaders like Coletti and LaBarbera said costs have come down at least 15 to 20 percent, cutting post-recession prices by about half.
Experts say trends in the concrete trades are among the best examples of the plan. The cost differential between union and non-union cement workers was above 30 percent after 2008. Unionized cement workers lost substantial portions of the market. After implementing wage reductions and hiring helpers, they’ve picked up 10 million square feet of new work, LaBarbera said.
“We are becoming more and more competitive,” he said, adding that about 75 percent of the trades have adopted these measures.
The new class of low-skilled workers are poached from non-union firms with the promise of a career path with higher wages, benefits and safer job sites, experts said.
“Literally we have peeled off hundreds of non-union workers,” LaBarbera said.
The optimism for the future isn’t shared by proponents of non-union workers who say that the cost differential between the two labor pools is larger than unions believe.
“I don’t think it’s down,” said Lance Franklin, chief operating officer of Triton Construction, which uses a mix of union and non-union workers in an arrangement called open-shop jobs. “The union numbers are always higher.”
Franklin, whose company is part of a group of open-shop firms called the New York Construction Alliance, said he gives more work to non-union builders because the companies’ craftsmanship is comparable to their more expensive counterparts.
“Most of the high-end residential condos right now in New York are being done by non-union open-shop contractors,” he said. “The quality is absolutely there. I think it’s as good if not better.”
Developers have argued that they would build union if the cost differential sank to at least 15 percent. But Michael Salgo, executive director of the Cement League, a unionized contractors group, is less hopeful than other industry leaders that the developers will stay true to their word.
“The problem is that we got the savings to the developers and they want more. The 20 percent saving was urged on us by developers but it’s not enough,” Salgo said.
He said that concrete has made recent gains but overall the trade has lost about 70 percent of their work to non-union companies. And because cement workers are usually among the first laborers hired, the decision to go non-union early on tips developers toward similar firms throughout the construction of the project.
“I’m not unoptimistic. I’m just realistically looking at the league and finding that the developers are choosing a non-union option more frequently,” Salgo said.
Brian Sampson, president of Empire State chapter of the non-union Associated Builders and Contractors, said that even after their cost of labor has come down, unionized workers still want too much.
“They can monkey round with that all they like — those rates are still far and above higher than the market rates,” he said. “The reality is that they can’t compete.”