All Commentary
Saturday, May 1, 1971

A Reviewer’s Notebook – 1971/5

Thirty years ago Thurman Arn­old, the great trust buster who was by no means a coddler of capitalists, used to prove his ob­jectivity by excoriating the labor unions in the building trades for their own monopolistic practices. On the surface there hasn’t been much change in the construction industry since Arnold‘s heyday, as M. R. Lefkoe makes plain in his The Crisis in Construction: There Is An Answer (Bureau of Nation­al Affairs, Inc., BNA Books, Washington, D. C., $12.50). How­ever, Mr. Lefkoe happens to be more solution-minded than Thur­man Arnold ever was, which may make a difference.

The first part of Mr. Lefkoe’s study lists the “labor-related prob­lems” in the industry and gives a long and lugubrious explanation of the major causes of the prob­lems. The problems include a dras­tic shortage of skilled manpower, escalating wage rates, the exces­sive cost of overtime, loss of man­agement control, unethical prac­tices, and special government in­terference (though this particular problem may be mitigated by the recent suspension of the Davis-Bacon Act, which has required the Federal government to match on its own projects the highest pay in any given area).

The causes of the problems are mainly bound up with the frag­mented nature of the industry. Contractors don’t ordinarily “sell” their services; they wait for the orders to come, and then, if they are in the general contract­ing business, they assemble the needed skills by paying subcon­tractors to carry out the various phases of the on-site work. The general contractor has to take labor as he finds it; he finds himself dealing with a whole host of craft unions that have their own jurisdictional disputes.

Simply because he is merely an assembler of subcontractors, the general contractor does not train his own labor. The crafts control their own apprentice systems. And, since they are better organ­ized than their employers, the crafts maintain a more effective political lobby. Not only do they artificially restrict the available supply of labor, they also put their political clout behind maintaining all sorts of code restrictions on the type of building methods and materials that may be used. In addition to the code restrictions there are such things as the li­censing of plumbers and electri­cians. Finally, there are our one-sided labor laws which tell the unions that they have the right to do things that are prohibited to management under the anti­trust laws.

Wide-Ranging Problems Boil Down to Coercive Power

Mr. Lefkoe’s recital of the causes of the problems is wide-ranging, but most every problem is aggravated by the coercive pow­er which the unions get from gov­ernment. Indeed, coercive power seems to be the only problem. Even the seasonal shut-downs, which waste as much as two months of the year in the north­ern United States, derive from the fact that the unions turn their face against the use of prefabri­cated sections that would enable the builder to erect basic weather­proof shells during breaks in the winter cold. “Municipal building codes,” so Mr. Lefkoe quotes from an official report, “sometimes need­lessly restrict the use of mater­ials or methods that would facili­tate cold weather construction.”

The root trouble in the indus­try comes from union control of the manpower supply, which is permitted by the government des­pite the fact that the Taft-Hart­ley Act supposedly outlawed the closed shop. By running their own restrictive apprentice system, the construction unions limit the number of newcomers in the vari­ous crafts. By keeping skilled labor scarce, the unions make sure of both high hourly wages and really cushy overtime. The excuse is that the overtime is needed to make up for the lack of employment in the winter. But the excuse doesn’t help the client who must pay the bills on a man-hour basis that pertains only to his particu­lar building job. By limiting the apprentices, the unions deny the Negroes, latecomers to our north­ern centers of population, the op­portunity to become skilled work­ers. So we have a social problem piled on top of an economic prob­lem.

New Role for Contractor

Taking the bull by the horns, Mr. Lefkoe urges an entirely new approach to the basic problem of construction manpower recruit­ment. He suggests that the gen­eral contractor had better assume total responsibility for the proj­ects he undertakes. Under this scheme the contractor would hire and train all his specialists, both on- and off-site. By using the “sys­tems” approach, the new-style con­tractor would run his own material development programs, his own apprentice schools, his own mar­ket research. Instead of waiting for jobs he would plan and erect buildings on his own for rental, or for selling. In short, he would act as a modern business enterpriser, not as someone who merely hangs out his shingle and waits for the client to come to him. Finally, the new-style contractor would form his own Construction Industry Ac­tion Organization and get busy with a campaign to rid the land of archaic building codes.

The beauty of Mr. Lefkoe’s pro­posal is that it would by-pass the problem of changing the Taft-Hartley Act and the Landrum-Griffin Act. Nobody could stop a new-style contractor from doing his own hiring and training if he was prepared to do an across-the-board job of providing the client with all the necessary skills and crafts. The jurisdictional element would disappear. Industrial union­ism might, of course, replace craft unionism under the new-style con­tractor. But the hiring hall would have disappeared. Even in cases where labor might bargain suc­cessfully for a union shop, the new-style contractor would be able to keep it an open union by hiring as many new people as he wanted and then turning them over to union membership after the ap­prentice period was completed.

Signs of Change

Is this all a dream? Mr. Lefkoe admits the difficulties, but notes that a few contractors are experi­menting in his direction. And non-construction companies that need a lot of new plant expansion are also in the business of doing their own construction by hiring and training their own building crews. Though Mr. Lefkoe is unrelent­ing in blaming the government for the woes of the construction industry, he misses one salient point. The shortage of skilled la­bor, and the high costs that result from this, are not entirely to be blamed on the unions’ govern­ment-protected apprentice system. They can be blamed in part on the plethora of government building projects that have come in with the growth of the Welfare State. If we had had less public housing (“the slums of tomorrow”) there would have been less competition with the private market for the available labor supply. Again, the suspension of the Davis-Bacon Act, a suspension that will lower the cost of government construc­tion, may mitigate this somewhat. But the failure to deal with the question of government building elephantiasis is the one weak spot in Mr. Lefkoe’s generally excel­lent study.

The Trend—and the Alternative

If we continue along the route marked by such legislation as Robinson-Patman and Landrum-Griffin, we shall, I believe, even­tually break down in one way or another. We shall either strangle ourselves in bureaucratic red tape, corrupt our bureaucracy so that we can get something done, or so hamper the activity of our private associations that full socialism will seem the only reason­able way out.

The realistic alternative is to rid ourselves of special privilege and the companion welfare-state idea that government is an all-purpose device fit to solve all our problems. In order to do this it is necessary to refute all totalitarian ideas, whether of the Marx­ian or Keynesian varieties, and to take up again the development of free-market principles with a full understanding of the theory and practice of the free society.

“Union Power and Government Aid,” THE FREEMAN, July, 1960

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.