THE SCANDAL OF BUILDING COSTS

ORGANIZED labor long ago acquired a stranglehold over the $85 billion construction industry. That power has not only led to an astronomic rise in building wages but has also enabled unions to load the nation's largest industry with archaic and inefficient methods of operation. As a result, construction costs are climbing so swiftly that they are complicating Washington's struggles to increase the supply of housing and restrain inflation. Last week George Romney, Secretary of Housing and Urban Development, challenged construction-union leaders to adopt reforms. His candor was greeted with boos, jeers and catcalls.

"I want to help you see yourselves as others see you," Romney told 3,000 delegates at a Washington conference of the A.F.L.-C.I.O. Building Trades Department. Then he reeled off the statistics of construction wage settlements which jumped from an average raise of 12.40 per hour in 1962 to 49.60 per hour last year. The unionists cheered wildly. Next the Secretary admonished them to relax apprenticeship restrictions that deny jobs to Negroes. They booed. When he urged building workers to increase their productivity, they booed again. He advised the unionists to end other practices that raise building costs. More boos.

Reddening but unruffled, Romney continued: "There is nothing more vulnerable than entrenched success. The demand for reform is growing. People are already talking about compulsory arbitration in the building trades."

Lagging Output. Some of the reasons for such talk are obvious. The cost of housing construction jumped by 10% last year, more than the increase in any other item of family living expenses. Home-building costs went up at an annual rate of 12% during March, the latest month for which statistics have been compiled. At the same time, U.S. housing output has fallen seriously behind the nation's needs. Last year the U.S. built just under eight houses and apartments for every 1,000 people compared with 16 per 1,000 during 1950, the peak year. On a per capita basis, U.S. housing output has fallen from world leadership to a level below Western Europe, Japan and Russia.

Widening Gap. Including fringe benefits, the average union construction worker now gets paid $5.91 an hour; in big cities he makes more. Philadelphia carpenters recently won a 23% pay increase, to $6.85 per hour, to be followed by a further 21% raise next year. Omaha roofers will get a 57% increase over the next two years, and Miami laborers will get a 70% boost over three years. The widening gap between wage rates in construction and manufacturing increases the chances of industrial strikes. Last year construction wage settlements were more than 31 times higher than those in oil, trucking and rubber, and five times the increases won by auto and cannery workers.

In fully unionized "contract construction"--factories, stores, high-rise apartments and highways, which account for two-thirds of the nation's annual building bill--labor takes its biggest bite. Employers have small incentive to resist union demands because they expect to pass on the entire cost to clients. Even when they try to hold the line at the bargaining table, the nation's 870,000 contractors are no match for the power of 3,000,000 building-trade workers, who are tightly organized into 10,000-odd locals by the A.F.L.-C.I.O.'s 18 craft unions. Most contractors are too small to operate efficiently and are so meagerly financed that a long strike can mean bankruptcy; striking workers merely move to high-paying jobs in other cities. Says Frank J. White Jr., executive vice president of the Associated General Contractors of Connecticut: "There is no collective bargaining in construction. They demand and we give."

Closed Ranks. Wages are high partly because of shortages of skilled craftsmen. Local unions deliberately restrict the number of their members. They keep tight control over apprenticeship programs (average length: four years) and force employers to recruit all their workers through union hiring halls. Unions defend their lofty pay and closed ranks by pointing to the seasonal nature of construction. Once convincing, such reasons are now losing their validity. In Chicago, for example, building-trades leaders admit that most of their members work at least 2,000 hours a year.

Another notorious source of needless construction costs is union opposition to prefabricated components. Contractors once thought that the 1959 Lan-drum-Griffin Act had barred such make-work practices as illegal boycotts of prefabricated parts. In a 1967 decision, however, the Supreme Court upheld a union's right to prevent the use of pre-fitted doors in order to preserve work traditionally done at the site. The ruling has caused wide repercussions. Plumbers refused to install prefabricated heating equipment at a Ford Motor Co. project until they first dismantled and reassembled all the piping at the plant site. A federal appeals court upheld the right of Manhattan sheet-metal workers to refuse to install an air-conditioning part purchased from a Milwaukee firm. The union insisted that the part be manufactured by its own members.

Although public construction constitutes one-third of the industry's total volume, Washington for years has exerted no pressure to keep labor's power from boosting the Government's building costs. The Nixon Administration recently acted to strengthen federal mediation machinery by centralizing efforts in Washington to solve construction disputes. But many contractors dismiss the move as trivial.

Pooled Projects. In an interview last week with TIME Associate Editor Gurney Breckenfeld, Romney laid out the dimensions of the difficulties and proposed some remedies. Said Romney: "We have got to tackle housing's cost problems right across the board--labor, land, money and materials."

Romney has been striving to introduce reforms that will cut costs and stimulate efficiency. His most ambitious effort, started earlier this month, is an attempt to reorganize both the Government's housing program and the industry that serves it. He insists that his plan can add between 250,000 and 350,000 units a year to U.S. housing starts, which are limping along at an annual rate of 1,500,000 and have been declining for three months. Named Operation Breakthrough, the plan calls for states and cities to pool their separate, federally subsidized projects into large-scale "mass markets." The Secretary hopes to attract giant corporations into housing construction and to wring economies from volume production. Localities would have to remove building codes, zoning and other barriers that fragment today's housing market, inhibit innovations and raise prices.

A.F.L.-C.I.O. President George Meany derides "people who build houses with their mouths." "Romney," he says, "has a fixation in his mind that you can turn out houses off a factory line like you turn out cars." But factory production of houses and room-sized components is an increasingly successful way to offset rising costs--in areas where unions and local laws allow such industrial methods to be used. U.S. Steel, Boise Cascade, National Homes, Guerdon Industries, Crane Co., Borg-Warner and many other firms have entered the field with ready-to-use rooms, baths or entire house sections.

Opening Up. A considerable overhaul of labor policies molded by the Depression of the '30s is plainly in order. The most urgent need is for the building trades to open ranks and find room for more qualified young men, particularly Negro ghetto dwellers. Toward that end, union hiring halls might be abolished by law and discriminatory apprenticeship requirements sharply reduced. Regional bargaining, such as Ohio contractors have begun, should replace local negotiating.

In many ways, labor's naked show of arrogance toward George Romney reflects a confidence that there is no limit to a contractor's ability to pass on to consumers the soaring costs of construction. Sooner rather than later, the unions may find that they are on a collision course with an aroused public.

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