Labor Relations Cases National Woodwork Mfrs. Assn. v. NLRB

APPENDIX

Senator TOWER. The next witness is Mr. J. C. Turner, who is the second vice president, assistant general president-legislation, International Union of Operating Engineers, AFL-CIO.

Mr. Turner, you may read your statement in its entirety, or you may summarize it. It will be printed in full.

STATEMENT OF J. C. TURNER, SECOND VICE PRESIDENT AND ASSISTANT TO GENERAL PRESIDENT-LEGISLATION, INTERNATIONAL UNION OF OPERATING ENGINEERS, AFL-CIO

Mr. TURNER. Thank you evry much, Mr. Chairman.

I am very appreciative of having the opportunity to be here. My name is J. C. Turner, and I appear here today, on behalf of the International Union of Operating Engineers, AFL-CIO, which has a membership of approximately 420,000. My position in the union is assistant to the president for legislation and second general vice president.

We oppose the passage of S. 3373 and S. 3654.

The right of freedom of contract is sacred to the American way of life. Under the labor laws of this Nation, workers have the right to organize into unions for the purpose of collective bargaining.

The process of reaching agreement and executing contracts involves endless compromises between management and labor. A very high percentage of collective bargaining contracts are negotiated without work stoppages. Once a labor contract has been executed it is enforceable by law. Indeed, large sums of money have been collected through court action for breach of collective bargaining contracts.

S. 3373, would authorize the nullification of provisions of collective bargaining agreements by administrative fiat. Despite long hours spent in reaching a mutual accommodation between management and labor, a stroke of the pen by a Government official, under S. 3373, could cripple or destroy a harmonious relationship.

For instance, if a collective bargaining agreement provided for a ratio of 1 foreman for each 4 workmen, it is conceivable that a Federal official could rule that the ratio should be 6 to 1, or 8 to 1, depending on his interpretation of lines 3 through 9 on page 1. It is certainly possible for the same Federal official to rule that no oiler be employed on a 40-ton crane despite a longstanding contract provision to the contrary. The possibilities are endless.

Collective bargaining contracts should not be subject to such frivolous treatment by any public officials.

The wording in section (a), that any provision or requirement of a local law can be set aside by the Department of Housing and Urban Development, if it interferes with or restricts methods of construction, is an unacceptable transfer of jurisdiction to the Federal level. Section (b) on page 2, is an open invitation to the enemies of organized labor to enter suit in Federal court to collect damages. If this bill is enacted into law, labor unions will be so busy defending themselves in court that they will never get around to carrying out their normal functions.

We wish to associate ourselves with the statement of the Building and Construction Trades Department on S. 3373, and on S. 3654. Their position is our position.

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S. 3654, would take us back more than 40 years insofar as social legislation is concerned. The national labor policy, under the DavisBacon Act, has, for all these years, been directed at the prevention of the exploitation of building tradesmen on construction projects financed through taxpayers' money.

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Over 30 States have adopted similar legislation to provide for vailing wages on construction financed from public funds. This proposed legislation is reaction that certainly could not be countenanced in 1972.

We call upon the Committee on Banking, Housing, and Urban Affairs to act unfavorably on S. 3373, and S. 3654, for the reasons which we have enumerated above and for the reasons given by all opponents to these two bills.

Senator TOWER. Thank you very much, Mr. Turner. Again, I apologize for the fact that we are facing some votes over here on the Senate floor, and we have to bring this to a fairly early conclusion.

Mr. TURNER. Thank you, sir.

Senator TOWER. Thank you, Mr. Turner. Before we continue I'd like to insert in the record a statement from Congressman John B. Ander

son.

(The statement follows:)

STATEMENT OF JOHN B. ANDERSON, REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

Mr. Chairman: I am delighted to support the measures under consideration by this Subcommittee, S. 3654, introduced by Senator John Tower and S. 3373, introduced by Senator Bill Brock.

First, I will discuss S. 3373, a bill aimed at ending code and union work rule restrictions on the use of new and improved construction technology. This bill is a legislative decendent of an amendment I sponsored to the Housing and Urban Development Act of 1969. As passed by the House and adopted by the SenateHouse Conference Committee, my amendment directed the Secretary of Housing and Urban Development to assure that there was no "restraint" by restrictive practices against the use of "new or improved technologies" which may reduce the cost or improve the quality of housing authorized under Operation Breakthrough, unless that restraint is "necessary to insure safe and healthful working and living conditions." I believe much of the success of Operation Breakthrough has resulted from the Congressional mandate to HUD that it make full use of technological advances in housing construction.

Operation Breakthrough now is nearing completion of Phase II and is entering Phase III-Volume Production. As a result, improvements are needed in my amendment to meet contemporary problems. Undersecretary of HUD Richard C. Van Dusen, in his testimony before this Subcommittee on June 21, 1972, described several shortcomings of the amendment. He noted that the section "is a mandate to the Secretary to take action but does not necessarily provide him with a specific means of making that action effective in situations where persuasion and the power to withhold approvals or funds are not enough. It is narrowly confined to housing aided under a particular authority. It provides no remedy directly to those outside of the Department who may be prevented from applying or making use of a new or less costly product, method or material."

S. 3373 provides a remedy to each of these limitations. It would apply to "any program administered by the Secretary of Housing and Urban Development." By including most federal housing programs, S. 3373 will insure that the new products and methods developed at taxpayer expense under Operation Breakthrough will be employed to the taxpayer's best advantage. Broad scale use of the new technology will lower the cost of his new house and decrease the per centage of his tax dollar that goes into federal housing subsidies.

S. 3373 also fulfills the need for enforcement provisions. I am happy that Senator Brock has chosen to place the responsibility for seeking remedies in the hands of aggrieved individuals, with a court the ultimate decision maker.

He rightfully has excluded the involvement of any Governmental agency. Senator Brock's approach should allay my House colleagues' fears that some federal official will become a housing czar, able to set aside union agreements and local codes.

I also am pleased that Senator Brock has seen fit to include the exception that allows a restraint to stand if it is necessary for safety and health. As I said during the debate on my amendment in 1969: "I could not for the world, with this or any other action, be guilty of doing anything that would be a departure from safe working conditions."

One further point before I conclude my remarks on S. 3373. During House consideration of my amendment, there were predictions that wholesale labor disturbances would result from its enactment. These have not come to pass. I am sure the same forecasts will be made about S. 3373 and, if it is passed, I am sure the result will be the same.

With rising inflation, the need for good, low cost housing is as great as it was in 1969. Through the use of technological developments we help meet this need. I think the statement of the late Walter Reuther made to this Subcommittee in 1968 is as relevant today as it was then :

We have got to fundamentally change the whole economics of the housing industry if we are going to make the rehousing and rebuilding of America economically achievable. You can't rehouse America if it costs as much to build a Chevrolet house as people pay for a Cadillac. It's that simple. And so we believe that what has to happen is that we have got to take a whole new approach to the question of housing. We've got to develop a national approach so that we get the economies of scale.

Mr. Chairman: I also support S. 3654, a measure introduced by Senator Tower to exempt all housing programs administered by the Department of Housing and Urban Development from the Davis-Bacon Act prevailing wage requirement. Personally, I would favor repeal of the Act entirely but recognize some of the obstacles in the way of such action at the present time, and for that reason feel that Senator Tower's bill is an important first step toward that objective. However, since I have been interested in this question for some time now, I would like to direct my remark toward what I consider to be some of the important adverse consequences of the Act as a whole-both in terms of the way it has been administered and the fundamentally erroneous economic premise on which it is based.

THE DAVIS-BACON ACT: ENGINE OF INFLATION

The Davis-Bacon Act provides one of the most significant examples of the adverse economic consequences of unwarranted governmental intervention in the market adjustment process. Enacted during the depths of the depression in 1931, it was designed to put a floor under steadily sinking wage rates and to protect communities from itinerant bidders who used cheap labor imported from low wage areas in other parts of the country to underbid local contractors. While there may have been some justification for this measure at the time as a temporary expedient to brake a deflationary spiral that had gotten out of hand, the law nevertheless remains on the books 40 years later under economic conditions of a far different order.

Moreover, at its inception, the Davis-Bacon Act applied only to direct Federal construction projects like post offices and defense facilities, but by 1971 the "prevailing wage" principle had been extended to no less than 70 Federal assistance programs including the Federal Aid Highway Act, the Area Redevelopment Act, and nearly all the housing, education, health and environmental programs. In 1971 these programs accounted for nearly $30.1 billion worth of Federally funded or assisted construction, or 30% of all construction in the nation during that year.

In essence, the Davis-Bacon Act provides that contractors bidding for Federally funded or assisted projects must agree to pay the "prevailing wage" rate in the community in which the work is performed, as that rate is determined by the Secretary of Labor. According to procedures formalized in 1963, the "prevailing wage" is defined as the rate of wages paid to at least 30% of workers in a particular job classification within a community, or in the event that 30% are not paid the same rate to the penny, then the "prevailing wage" is considered to

be the average of that paid to all workers. In determining the "prevailing wage" for each area, the Secretary is required to consider signed union contracts, information supplied by local, state, and Federal agencies. and to conduct field surveys when the data on hand is deemed insufficient to make an accurate determination.

The problem of lax administration

Though by its very nature the Davis-Bacon Act is, in my view, inflationary, the manner in which it has been administered by the Department of Labor has served to significantly magnify its detrimental impact on the economy. This administrative problem has stemmed, in large measure, from a work-load that has rapidly outpaced the Department's capacity to fulfill its responsibilities. Between 1945 and 1971, the number of separate wage determinations issued annually by the Department increased from 3900 to almost 60,000 as the whole gamit of new post-war Federal grant programs involving construction were brought under the purview of the "prevailing wage" requirement. However, at the same time that this work-load was increasing by a factor of twenty, the manpower available in the Wage Determination Branch of the Labor Department expanded less than three-fold. The result of this widening spread between capacity and work-load has been increasing faulty and lax administration which has been sharply criticized by the Government Accounting Office (GAO) in more than a half-dozen separate reports to the Congress during the past ten years. These GAO reports found that the Department had repeatedly overestimated "prevailing wage" rates, sometimes by more than 100%, at a cost to the government totaling billions of dollars.

Specifically, this faulty administration has taken three distinct forms. First, the law provides that separate determinations are to be made for each "city, town, village or civil subdivision of the State" in which construction work is performed. However, the GAO and other investigators have found that the Department has constantly ignored this requirement and has, in effect, "imported" prevailing rates from non-contiguous high rate areas to lower rate communities. For example, one GAO study found that the Davis-Bacon determination for power equipment operators throughout the state of Maine was well above the rate that actually prevailed in that state, but corresponded almost exactly to the union negotiated rates in Boston. In another study, the GAO found that Department determinations for a project in Quantico, Virginia ranged anywhere from 28% to 100% above the average rates that prevailed in that community and were apparently based on union negotiated rates for Washington, D.C., over 35 miles

away.

It is, of course, always hazardous to generalize from a few isolated examples, but other studies suggest that the tendency identified in these GAO reports may be quite widespread indeed. One impressive piece of evidence on this score is a study by Professor Damodar Gujarati of the University of Chicago, based on a sample of 300 counties representing all fifty states. Professor Gujarati's analysis shows that for a period in the early 1960's, 25% to 38% of the "prevailing wage" determinations for building construction projects in his sample counties were based on rates prevailing in non-contiguous areas rather than the community where the construction actually occurred, and that in the case of heavy and highway construction 46% to 73% of the determinations were based on rates from areas outside of the communities involved. Moreover, the average distance of these non-contiguous counties from the community in which the project occurred was from 72 to 87 miles for the nine separate crafts analysed in the study, despite the clear stipulation of the statute that separate rates are to be determined for each local community.

The effect, then, of this persistent faulty administration of the Act has been an artificial spill-over of rates from high-wage areas into lower-wage surrounding regions in which unimpeded market forces would have produced a far different outcome. In turn, the brake that could be expected to be exercised on rising rates in high wage areas by lower rates in surrounding regions has been considerably diminished.

Perhaps even more objectionable has been the Department's tendency to rely almost predominantly on union negotiated rates in setting the prevailing wage level. While only about 65% of the construction labor force is unionized, Professor Gujarati found that in most of the major trades nearly 100% of the "prevailing wage" determinations carried union rates. This is not entirely surprising, though in light of Professor Gujarati's accompanying finding that independent