People are either saints, corrupt or corruptible; to which group the President of Central Labor Council of New York City who has just been indicted for racketeering, belongs, we will only know when his trial is over. But this much we do know. If Brian McLaughlin is innocent, he is a saint; in the world of government contracting and union bossism in which he was functioning, temptations are irresistible.
Normally the problem with government contracting is that the contractor wants to cut corners and there is a government official who gives him what he wants. Halliburton and Cheney, defense contractors and U.S. representative Duke Cunningham, contractors in Illinois and Connecticut and Governors Mitchell and Rowland all come to mind. But paradoxically, according to the indictment, McLaughlin started his slide because in one case the contractor did not want to cut corners and all the government officials were upstanding. The problem started when after submitting the lowest bid for a street lighting contract, the contractor decided that his bid was too low. He asked government officials for permission to withdraw the bid, but they refused. It was then that the contractor approached McLaughlin in order to buy his assurance that there would be no union action against him if he hired some non-union workers instead of union members. For government contracting even honesty is a problem, it turns out.
A contractor is normally free to hire non-union workers, but when it comes to work for the government, there is a law that requires the contractor to pay his workers the “prevailing wage,” which normally is the union wage. The enforcement of the law is lax, however, and the penalties for non-compliance miniscule. So far this year in New York City the penalties for contractors who were caught underpaying their workers amounted to only 14% of the underpayment. As a result, contractors are justifiably fearful that if they abide by the law they may lose a contract to a contractor who will not. Some contractors skirt the law by paying the prevailing wage for only some of the work that is eligible for it. But the contractor who contacted McLaughlin found a full-proof way of not getting caught no matter how many union members he did not hire because McLaughlin, in addition of being the President of the Central Labor Council, was also the boss of the union of the street-lighting electricians. So profitable was this partnership that that according to the indictment the contractor and McLaughlin agreed to continue it in later contracts.
Of course, McLaughlin’s lifestyle might have made union members suspicious. But although representing electricians, McLaughlin did not earn an electrician’s salary. Too many union bosses subscribe to the view that employers will not negotiate in good faith with them unless they earn comparable salaries and enjoy a similar standard of living. As a result union members and their representative live in different worlds, and the members have little ability to judge whether their representatives, who are after all their employees, serve them well, or are on the take. McLaughlin benefited from this fog for a while, but ultimately this may have been his downfall. Had he known that spending the money that the contractor allegedly offered him would lead to suspicions by the union members, it is possible that he would have rejected the bribe (assuming that he did accept it).
If McLaughlin is guilty, he will join a long list of powerful men who succumbed to the same temptations before him. It is therefore clear that the problem calls not for building more jails but for changing incentives. In the first place, government work should be done by government employees, not by contractors. Unlike contractors, government employees do not stand to gain financially from cutting corners.
In addition, expecting contractors to submit low bids and at the same time pay high wages will never work. If the government wants workers who do public works to earn decent wages, it should perform the works with government employees, not contractors.
As for the life style of union bosses, when Mahatma Gandhi negotiated with the British Empire he came to London wearing a plain white sheet. Union members should realize that an expensive suit on their representative may be more an indication that the representative is for sale than that he or she deserves respect.
Government governance and union governance are the real culprits in this drama, even if Brian McLaughlin is indeed guilty.
MOSHE ADLER is the director of Public Interest Economics, an economic consulting firm, and is writing a handbook about the construction industry. He can be reached at: email@example.com