THE WIDESPREAD HARM OF UNFAIR CONTRACTING
April 25, 2013: Failure to pay a worker his or her due wages is a form of theft, and the victims are often those who live at the bottom of the pay scale and in the margins of our legal system. In construction, hospitality, and many other industries, wage theft, worker misclassification, and other violations of state and federal labor laws are a growing problem. No decent, compassionate person would dismiss the seriousness of these problems, but if one is not directly affected by these problems, they are easy to put out of one’s mind. Beyond making us feel bad for workers cheated out of wages, and angry at employers who steal those wages, wage theft and other forms of contracting abuse have little effect on those of us who are not being cheated, right? Wrong.
The damage of unfair and unlawful contracting ripples far beyond the individual workers whose wages have been stolen, harming lawful employers, governments, taxpayers, health care providers, and the construction industry as a whole.
In a recent two-part series broadcast on National Public Radio’s Morning Edition, journalist Wade Goodwin exposed the seedy underside of dirt-cheap construction prices in Texas: cheating, wage theft, misclassification, and exploitation. Goodwin demonstrates that in places like Texas, where regulation is light and enforcement is rare, contractors who play by the rules and shoulder their fair share of payroll taxes and insurance premiums are regularly outbid by contractors who don’t. Health insurers, providers, and their clients become victims when they must bear the costs of caring for injuries sustained by workers whom employers misclassified to shirk paying into the state’s workers’ compensation system. So not only do law-abiding contractors lose jobs to the scofflaws, shirkers, and cheats; they wind up having to ante up the very unpaid obligations that allowed these firms to outbid them in the first place. Governments and the public are doubly socked as well, first by significant losses in payroll and income tax revenue, and then by the increased demand for social services from unpaid and underpaid workers and their families.
The Morning Edition story follows a similar three-part series published last year in the Raleigh, North Carolina News and Observer which detailed the effects of unlawful contracting practices on workers, law-abiding contractors, and the public.
Over the long term, a low-cost-at-any-price race to the bottom makes it much harder to find ethical, high-road contractors, because law-abiding contractors are driven out of business or out of town. Not surprisingly, such an environment also makes it hard to attract, train, and retain the workers that are the lifeblood of the construction industry. Allowed to persist, contracting misdeeds can, and do, hurt everyone.
A number of organizations and individuals are working to change this locally and nationally. In Texas, the Workers Defense Project, building trades unions, responsible contractors, and community organizations have started the Build a Better Texas (BBTX) campaign to publicize these issues and push for change. The campaign has developed a number of short videos to draw attention to wage theft, worker misclassification, work site safety, and other issues.
Individual workers and their families feel the most direct harm of wage theft, worker misclassification, insurance fraud, and other forms of exploitation, but the damage does not stop with them. Responsible contractors, ethical owners, the construction industry, governments, and the general public all are adversely affected by contractors who cheat to win. It is up to all of them, and all of us, to demand the kinds of fair contracting reforms and enforcement mechanisms that will help build a better Texas, a better United States, and a better world for everyone.
Ed Rehfeld, LECET Manager of Communications