Quantifying the Value of Union Labor in Construction Projects

Independent Project Analysis (IPA) released a study titled, “Quantifying the Value of Union Labor in Construction Projects.”

This study expands on an earlier study that found that union labor is more productive than open shop labor and projects that employed union labor cost less, despite the higher average all-in wage rate paid to union labor. Other studies have similarly found that higher craft labor costs for prevailing wage projects, which often reflect union wage rates, do not result in higher total project costs than non-prevailing wage projects. The current study confirmed the findings from the earlier IPA study and examined some of the underlying differences in union labor versus open shop labor that may explain the differences in productivity as well as the overall effect on project outcomes. The study found:

Productivity for union labor is 14 percent higher versus open shop labor

Projects that use a mix4 of union and open shop labor have 8 percent better productivity than projects that use all open shop labor

The use of union labor reduces the total cost of projects by an average of 4 percent versus when open shop labor is used

The union craft labor and foremen have demonstrated a significantly higher level of skills versus open shop labor

Strong relationships exist between higher craft skills and lower project total costs as well as better construction schedule predictability

Projects are 40 percent less likely to experience a shortage of skilled labor when union labor is sourced versus open shop labor

Projects that are short on skilled labor are twice as likely to have a 10 percent or higher cost overrun and are more likely to have schedule slip of 25 percent or higher

Turnover of labor on projects is one-third less likely when union labor is employed versus open shop labor  Turnover of labor is linked to worse project cost and schedule outcomes

Projects using a mix of union and open shop labor saw benefits from the presence of union labor in each of the measures of performance versus projects that employ solely open shop labor

The overall findings indicate that the combination of better skills, more reliable sourcing of sufficient skilled labor, and better labor stability (e.g., less labor turnover) all contribute to better productivity and better project outcomes.