Subsidizing Union Pay?

The Story

The building trades unions and the construction industry were at odds last year in a debate over renewal of the 421-a property tax credit for affordable housing. The unions wanted a requirement that only their workers could be used to build units receiving tax breaks, and the developers said it would be too expensive to do so. Now, Governor Cuomo has proposed to break the stalemate by having the state make up the difference in the workers’ salaries. Using public money to supplement pay for union members—to enable a tax exemption—isn’t just a terrible waste, it’s a misguided view of the relationship between government and markets.

The Facts You Need to Know

  1. Vow: In April, Cuomo promised the building trades unions that all state construction projects would use union labor. Read More.

  2. Pay More: Requiring union labor on public construction projects adds 20 percent to the overall cost. Read More.

  3. Anti-poverty Program: Cuomo says that union construction workers on Manhattan developments deserve $65 per hour so they don’t have to live on a “poverty wage.” Read More.

"IT'S A REAL HEADSCRATCHER HAVING A TAX SUBSIDY AND A WAGE SUBSIDY. I'M STRUGGLING TO THINK OF ANYTHING LIKE IT IN THE COUNTRY."

EJ McMahon

Twitter Take

The Past is Present

Union Power Comes in Many Forms By Steve Malanga (Spring 2011)

“When the skyrocketing cost of public employees’ salaries and benefits helped push New York City to the brink of bankruptcy in the mid-1970s, state and local officials put together a bailout that reduced pension and benefits packages for Gotham’s workers. But by 1987, with the city out of the crisis, New York’s unions were again demanding better pensions and benefits. Mayor Ed Koch balked, but the union simply abandoned the bargaining process and went to Albany, where it offered state legislators its political backing in exchange for enacting generous new benefits. ‘It’s the same old story,’ said a frustrated Koch. ‘Giving in to the unions will help assembly members and senators stay in office.’ The mayor decided to go to Albany, too, and dissuade the legislators from granting the new benefits—but they told him to stay home. ‘They sent [labor leader] Barry Feinstein to see me,’ Koch informed me several years ago, recalling the incident. ‘He told me that there was nothing I could do to stop the bill.’ The cost to the city’s taxpayers: $101 million annually.”

And in other news...

“The New York area is home to the Yankees and the Knicks, the Belmont Stakes and the Westminster Kennel Club Dog Show. But the city that is the capital for so many sports has hardly been a center for auto racing. In July, that will change, when the Formula E circuit comes to the city for two races.”