Business Matters

A ten-part series on resolving Washington's anti-business climate

"We will do everything in our power to guarantee a thriving, environmentally-sustainable business climate." – Governor Gary Locke –

Part 10: Bringing fairness to Washington’s labor practices

While priding itself on strong labor relations, Washington actually has been perpetuating a climate of unjust labor relations because it embraces project labor agreements (PLA) and prevailing wage laws. Amazingly, it took an executive order from President Bush (No.13202) to bring fairness to the Capitol dome renovation and repair project in Olympia. Facing the possibility of losing $15 million in federal grants, Governor Locke was forced to open the project bid to all the state’s contractors, eliminating the standard awarding of a PLA for public projects.

PLAs are made between the manager of a construction project and a group of local unions or a building trades council, and require that all employees on the construction project be represented by a union. A contractor who does not bargain with unions (open shop) and wishes to be awarded a construction project under a PLA must jump through a number of union hoops. For example, a contractor is often forced to reduce his workforce to a handful of "core" employees; hire new workers from the union hall; pay representation dues for all non-unionized employees; pay into union health and retirement funds (though the employees likely already have these benefits); and agree to obey union work rules.

A Wharton Study illustrated that the "terms and conditions" costs of mandatory unionized labor add an average of 6.8% to labor costs. While estimates vary, projects built by union shops tend to increase the costs by 5% to 26% over similar projects built by non-union contractors. In this time of tight revenue and budget crises, Washington would be prudent to stop incurring these cost overruns and instead allow the free market system to work when accepting bids for public works projects.

Along with PLAs, Washington’s prevailing wage laws also serve to create a caste system for contractors in the state. In 1945, the state enacted our version of the federal Davis-Bacon Act (RCW 39.12.020). This law requires workers to be paid prevailing wages when hired for public works projects or maintenance of public buildings. State law defines prevailing wage as the combination of hourly wage, usual benefits and overtime paid to the majority of workers, laborers and mechanics in the largest city of each individual county.

In essence, the prevailing wage law sets a high-minimum wage for labor on public work projects. Competition in contracting is substantially reduced or eliminated. Without this wage competition, contract prices cannot be driven down, increasing the final cost. Most studies on prevailing wage laws have concluded that they substantially add to the cost of project construction.

In 1989, the Washington State Senate proposed legislation to eliminate application of the prevailing wage to projects that are estimated to cost less than $100,000, and limit wage surveys to collecting data from only non-public works projects. At that time DOT prepared a fiscal note for the bill (SB 5822), which concluded that if the law was passed, DOT projects of less than $100,000 would save 67% on labor costs and 20% of total project costs. For projects costing more than $100,000, DOT estimated a 33% savings on labor and 16.5% savings on total project costs.

To resolve these cost overruns and unfair bidding restrictions, EFF challenges Governor Locke to adopt the five principles outlined in President Bush’s executive order when awarding bid contracts: (1) All project contracts should be awarded based on open competition; (2) Washington should maintain neutrality towards parties bidding on project contracts; (3) Reducing construction costs to the taxpayers should be of paramount importance; (4) Expand job opportunities for small and disadvantaged businesses by not forcing them to conform to the one size fits all rules that govern labor unions; and (5) Prevent discrimination against businesses and their employees based upon labor affiliation or lack thereof.

Along with adoption of these five principles, Washington should repeal the prevailing wage law to assure maximum efficiency of taxpayer dollars while protecting the workers and their wages in each local area. At a minimum, the law should be revised so the prevailing wage for each type of work being done is calculated from the average wage rates in the local area, not just the largest city in each county.

While unions do have a legitimate role in protecting against unfair treatment for workers, the state has favored labor organizations over non-union businesses, squandering precious tax-payer dollars in the process. Washington state government should be in the role of maximizing the efficiency of tax dollars, not choosing sides between labor unions and non-union businesses.

This is part ten in a ten-part series on resolving Washington’s anti-business climate.

Intro | Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9

Contact: Jason Mercier, Deputy Communications Director, (360) 956-3482 or jmercier@effwa.org.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org