New Yorkers Pay The Price So The Contractors Who Cheat Can Get Rich
When some contractors choose to cut corners and break the law to win bids on construction projects, the rest of us pay for it. Watch Walker Bragman's interview with economist Dr. James Parrott of the New School.
Would you agree to hand over a chunk of your hard-earned paycheck each month to line the pockets of wealthy real estate developers? Probably not. But unfortunately, if you’re a tax paying New York citizen, you’re already doing that.
To better understand how fat cats are picking the pockets of everyday New Yorkers, Union Built Matters spoke with Dr. James Parrott, the director of economic and fiscal policies at the Center for New York City Affairs at the New School. Dr. Parrott is a leading expert on the New York City construction industry, and the ways in which unscrupulous developers and contractors exploit the system— and their workers— to enrich themselves at the expense of everyone else.
One tactic non-union contractors can use to undercut union shops is to miscategorize their workers as independent contractors. This allows them to rob the very people risking life and limb to build their buildings of the benefits that come with employee status. Dr. Parrott explains that “there’s substantial cost differences in hiring a construction worker as an employee in paying unemployment insurance and workers' comp… not to mention health benefits.” This is an issue you don’t find on union job sites.
When some non-union contractors pay less by cheating the system, the job itself doesn't cost less. It costs the same. The New York taxpayer pays the difference.
Everyday New Yorkers get stuck with the bill when wealthy non-union contractors decide to cheat the system by missclassifying workers as independent contractors rather than as employees. That determination allows the non-union management to make more money because they avoid paying health benefits, unemployment and workers comp insurance, which costs then get foisted on the New York tax-payer.
Unfortunately, shameless behavior on the part of non-union contractors kicks off a cascading series of social costs that lands, ultimately, at the feet of taxpayers “It's not so much that society benefits from a lower cost construction project,” Dr. Parrot explains. “The construction company… is experiencing some reduced costs, but those costs are ultimately displaced onto other players in the system.” In this case ‘other players in the system’ includes everyday New Yorkers.
The most immediate victim of unscrupulous contractors are the miscategorized workers themselves. “They're probably not making union scale. They don't have the benefit coverage, they don't have the social insurance protections, so they're missing out on a lot,” Dr. Parrott explains. In addition, they do not have access to the training and apprenticeship programs needed to keep them safe on the job and put them on a path to the middle class.
The next group that suffers is all the other New York employers, in the construction industry and beyond, who play by the rules and pay into the workers’ comp and unemployment insurance systems. Especially the law abiding, union construction shops who are being undercut by dishonest contractors that artificially lower their own costs by passing them along to everyone else.
But ultimately, the everyday New Yorker ends up picking up the tab for non-union contractor negligence. The bill comes in the form of uncompensated healthcare costs for misclassified workers who are denied health insurance while working one of the most physically punishing jobs on earth. It comes in supporting workers who have to turn to public assistance when they are cast aside at the end of a project and, as independent contractors, are ineligible for unemployment insurance. And in a myriad of other costs that non-union contractors pass along to the taxpayer.
In the words of Dr. Parrott. “It's a mistake to see, think of this as a cost savings measure. It doesn’t save cost… it displaces cost from the perpetrator onto everybody else— initially the worker, then other employers, and then taxpayers.” It’s time to put an end to it.
Walker Bragman is a journalist based out of New York.
Mark Colangelo is a writer and blogger.
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