Construction Informer

The current economic crisis, which is nothing more than a cyclical devaluation necessary to keep the currency from bottoming out, is causing states and municipalities to make decisions about prevailing wage legislation.

In Cedar Rapids, IA, a bill that sets a prevailing local wage, benefits and overtime, is waiting for one more vote in order to become law. In Colorado, a bill that would have established a prevailing wage for employees of contractors was defeated in committee. Some voices in Washington state are calling for the repeal of its prevailing wage law.

Prevailing wage largely affects public works projects and is often credited with driving up the costs of those projects. Although it isn’t really clear that’s the case, even when that idea is advanced by an opponent of prevailing wage. Here is how Mark Latimer, president of the Rocky Mountain Chapter of Associated Builders and Contractors explained it:

In some cases, the prevailing wage is lower than the going rate at the fair-market system. These are decent-paying jobs. We believe the prevailing wage artificially inflates [wages] and drives up the cost of construction. It will hurt the economic stimulus and restrict the free market.

So, if prevailing wages in some cases are “lower than the going fair-market system,” and they are “decent-paying jobs,” how are they going to “drive up the cost of construction?” More to the point it just may be that when prevailing wages are in effect contractors can’t make as much on reselling that labor without pricing themselves out of the market.

Since a person’s labor (expressed as time) is largely the only thing most people have available to sell for their livelihood, perhaps contractors should try to find more value somewhere else in the resources under their control. After all, what is often overlooked in the discussion of prevailing wages is that people are going to spend those wages in the community. So if they have a little extra that’s a good thing, isn’t it?

The other point often advanced by prevailing wage opponents is that the free market does a great job of setting wages. But you have to ask, great for whom? It’s probably true that the free market sets a great wage for a person who is buying the labor, but if you ask a lot of the people supplying the labor they might disagree.

Those on the government side, who propose prevailing wages, sometimes see them as a tool to control those who are eligible to bid on projects. As one legislator in IA put it:

Without it, the state would see fly-by-night, out-of-state contractors coming into Iowa underbidding our standard of living.

So, could it be that prevailing wage offers government a chance to minimize due diligence while it qualifies contracts and enforces building codes and contract delivery? Especially in these times of diminishing budgets having a “safe” pool of bidders could save time and money.

It seems that when you get to the bottom of the prevailing wage issue you find it is simply a manipulation of an already over-manipulated economic system, with proponents and opponents squared off over who will benefit and who will lose. This is no different than most other issues that have economic gravity. Perhaps it would be better to establish a scorecard system where one economic interest is served one time, and another is served the next. That way, at least things might stay a bit more balanced.

The market for housing has been such a strong influence on the larger economy for so long that people are grasping at all kinds of straws to keep it viable. So now, according to an NPR news report, we have the National Association of Home Builders (NAHB) looking to Congress for help in keeping the home building going. This, at a time when there is a glut of homes on the market. Let’s see, we have too many homes so…let’s build some more!

The idea being proposed is to give home buyers a tax credit (as much as $22,000) for purchasing a new home and throw in some subsidies that would effectively make the interest rate on the purchases about three percent. One analyst puts the cost of such a program at hundreds of billions of dollars. When we add this to the mounting price tag associated with all the other bailouts we begin to see that at some point what may be good for business, is no longer good for taxpayers. And whether we are in business or not, we are ALL taxpayers.

It’s understandable and completely expected to try to fix things when your back is against the wall. But for many years home builders have enjoyed great profits and steady work. How much of that money has been squirreled away for a rainy day? Apparently not enough. How much of that money is the result of spending millions on lobbying against past legislative efforts that might have helped minimize the current economic doldrums?

Just related to the Fannie Mae and Freddie Mac debacle consider how NAHB supported those things that would keep the frenzied pace of building going, even in the face of mounting evidence the mortgage behemoths were on a collision course with failure.

In 1998 the NAHB successfully lobbied to increase the values of homes that Fannie could insure, a change that Fannie itself was opposed to.

In April of 2005 when Congress was trying to toughen oversight of Fannie and Freddie, and restrict the sizes of their portfolios, (so tax payers wouldn’t be over-exposed), the NAHB said it would oppose any legislation that would reduce Fannie and Freddie’s capacities.

Then in December 2007 NAHB came out against a Fannie Mae effort to shore up its revenues by charging a fee for loans purchased by lenders. NAHB also conveniently reversed its earlier position and called for more, and quicker, federal oversight of the organization.

Of course let’s not forget the help home builders have already received like the ability to write off losses from 2008 and 2009 to offset profits.

At what point is the health of the nation considered when you advocate for one piece of legislation or another? Is keeping the money flowing the only criteria? Where is the barometer that a lobbying organization uses to make sure it isn’t just flitting from issue to issue and loosing sight of the big picture? By one estimation 34,000 of the nation’s home building businesses will fail during this economic event. That’s really bad news, but it’s quite possible they are not blameless for their collective fate. Everybody is being visited by this disaster and its sad to see the groping and grabbing and narrow-minded solutions that focus on filling the lifeboat with treasure even as the ship sinks.

We aren’t going to be able to build our way out of this one. This is the time to shore up what we’ve got, weather the storm, and learn to make better decisions when the going gets easy again.

Independent contractor status keeps surfacing. Several states have been adding legislation aimed at discovering workers who are misclassified. Typically the legislation creates a process that helps the worker to first of all determine if in fact they are independent contractors under the law, and then, if not, they supply processes whereby the employee can petition the government to make a determination without fear of retaliation.

There is a bill pending in Congress, H.R. 5804, that would provide a safe harbor for taxpayers (read employers and others who hire people to do things like work on construction sites, clean their houses and do their laundry) who have fulfilled a couple of requirements so that long standing independent contractor relationships could be validated and approved. By my reading of the bill there didn’t appear to be any undue requirements being placed on the employer or independent contractor. Later the Bill stipulates that any individual who performs services for a “taxpayer,” can request their status to be reviewed at any time within a year after a determination has been made.

We all know where this is going – it’s about making sure that taxes are being paid. There may be a side benefit in that it could help people who are working for someone and are misclassified as independents, when in fact they are employees. Unscrupulous people will always try to get something for nothing and this is one way it’s done. It may also be trying to ferret out illegal workers who are not citizens.

An organization by the name of Coalition for Independent Contractor Freedom points to these legislative efforts as ones that are trying to take away an individual’s right to be self employed, independent contractors. This organization bills itself as “A Voice for Independent Contractors,” and includes articles about how those independent contractors may become victims of government regulations and includes an opportunity to make a donation.

In the three legislative actions I’ve looked at the focus appeared to be helping people who may be misclassified as independent contractors to remedy the problem, not to unduly burden their ability to work as independent contractors. 

From my experience in construction there are far too many “independent contractors,” who are siphoning off valuable work from people, (even from other independent contractors who really fit the definition), who are in the business for the long haul – not just to make a quick buck while they wait for the next job to come along. These same nascent independents will be the first ones to go on the public dole or sue the people who hire them when the opportunity arises. 

I don’t like a lot of laws, but sometimes people just take too much advantage and laws are one way to keep the playing field level.

 Trade Leader Gathering: Beginning today and running through Wednesday the Building and Construction Trades Department of the AFL-CIO will celebrate 100 years of union activities. Concurrent to the celebration is the organization’s National Legislative Conference. Both Senators Clinton and Obama are expected to address the gathering at the Washington DC Hilton and Towers. The organization claims to represent 2.5 million building trades workers.

Follow the Sun: From May 3-8  San Diego will host the 37th annual SOLAR conference that is expected to highlight 8.5 million green-collar jobs. Presented by the American Solar Energy Society the event expects more than 150 businesses and vendors and will feature hands-on workshops, a renewable energy film festival, solar demonstrations and a green-collar job fair. Public Events are being offered May 3 and 4 while the more technical content is featured through May 8.

New Roto-Hammer Announced: This 18 inch monster, weighing 17.75 pounds is Metabo Corporation’s new model called KHE SDS-Max. The company says it delivers 796 inch-pounds of rotational torque and takes solid bit sizes up to 1-3/4", and 6 inch core bits. There are large switches on the machine so you can operate them while wearing gloves and included is a reduction switch letting you reduce impact energy by 30 percent when working in brittle materials. This feature also helps to prevent spalling.

When To Tank: Rheem Water Heating claims it is the only US manufacturer of both tankless and tank-type water heaters and therefore is a credible resource on choosing between the two systems. Everyone can learn something at the new website set up by the company but pros can also pickup up white papers and subscribe to a bi-monthly newsletter. Some of the differences Rheem highlights include:

• Tankless costs about double;
• Tankless cost about half to operate;
• Replacing a tank-type heater with a tankless can cost up to $3,000.

The folks at Building Design+Construction recently completed a survey and white paper on green buildings to get an idea where different people come down on aspects of building green. The people who were polled included AEC industry members, restaurant executives, hoteliers, corporate real estate executives, college and university facility executives, K-12 facility executives and hospital executives.

There are some interesting perceptions that were revealed. For example, almost everyone polled thought building green costs more than typical construction, even though recent reports have shown that’s not the case. All respondents favored the idea that the life cycle costs of green buildings would be less than similar conventionally-built buildings even though there are no long-term life cycle cost case studies yet to bear that out. By a strong vote of confidence all of those polled believed that those who control the purse strings for building projects are more convinced today to invest in those projects than they were just three or four years ago.

Meanwhile, over in the UK where the green movement is quite robust new regulations are being said to cause up to a 60 per cent increase in new building costs. Already European and UK green legislation has added 14 percent to costs. One of the biggest culprits is the stipulation that new developments must generate 10-20 per cent of their energy needs through onsite renewable power. In recent years it seems that where Europe and the UK goes, so goes the US eventually, so it might be wise to start watching those legislative dockets.