I often get asked by people not in the construction industry why the vast majority of nonresidential construction work in Northwest Indiana is done by contractors who are union employers. That’s a good question with an answer that might surprise those not familiar with the construction industry.
The answer is that most contractors in Northwest Indiana choose a business model that essentially outsources much of their human resource functions in a way that guarantees them the highest quality, trained and skilled workforce. That is, these contractors choose to employ skilled craft workers through local craft unions.
Most people, especially business owners, are probably familiar with the process by which an employer enters into a collective bargaining agreement with a union. Federal law provides for a process by which a union interested in “representing” an employer’s workforce initiates steps that result in a vote among the employer’s workers.
If the workers vote to be represented by the union, then the union will take additional steps toward an eventual collective bargaining agreement with the employer. The employer may not have much influence in this outcome and may view the union’s representation as a burden. All too often, an adversarial relationship develops between the employer and union.
The process in the construction industry is usually much different. In fact, the relationship between employers and unions is different in construction than it is in most other business sectors. Contractors, as a rule, enter into a collective bargaining agreement voluntarily because they have determined that do so is a benefit to their business operations. Under their agreement with the union, the union agrees to provide several valuable human resource services to the contractor.
First, the union agrees to provide to the contractor a readily available pool of highly skilled, trained craft workers. The contractor that needs additional skilled workers to complete a project can draw from that pool of workers to find the skilled craft workers they need for the project without a lengthy search and training process. All of that already has been done through the apprenticeship training programs.
When that job is done, the contractor can move those workers to another job or release them back into the hiring pool, knowing that when the next job comes along workers will again be available on short notice. The contractor doesn’t have to incur the cost of keeping trained workers on their payroll for fear of not having them when the next project comes along.
As in most business sectors, the skill level of workers in construction is critical. Given the fluid nature of the labor supply/demand market of the construction industry, with workers moving frequently between employers, the centralized training model in the union sector of the industry provides the employer with another valuable benefit — an efficient and equitable cost-sharing system for skill training.
Absent the centralized training system of the apprenticeship schools, a contractor would have to bear all the cost of training a worker for three or four years as the apprenticeship schools do. Through the collective bargaining agreement between the union and employers, all employers share the cost of training the local skilled workforce in an equitable cost-sharing system.
The collective bargaining agreement also provides portable, centrally administered employee benefit programs such as pension and medical insurance. This relieves the employer from the cost of administrating their own benefit program and helps the union sector recruit the most skilled workers by offering attractive benefits.
The union employer in the construction industry is effectively outsourcing much of its human resource functions through the collective bargaining agreement.