Marc D. Duncan, CEI and Brentt Tumey
July 2006In the March 2006 issue, we published a My Side column that provided a contractor’s opinion of the immigration issue. The topic is a hot one, and that column prompted some other contractors to write in with their views, which were published in the May 2006 issue. In that same issue we asked readers to provide us with their take on the immigration debate, and those responses appear in the article on these pages. The first is from the author of the original My Side that started it all, and the second is a new angle provided by a labor broker.
If you continue to write in, we’ll continue publishing the deliberations as seen by those of you in the construction industry. Send your comments to our editor at email@example.com. For more on this topic, be sure to read this month’s Problem Solved.
Immigration: Food of the Nation: 'The Sequel'
By Marc D. Duncan, CEI
Raleigh, North Carolina
The first article (My Side, March 2006) launched a wonderful outpouring of positive dialogue and examples of economic strength brought to our nation by immigrants. Many also wanted to discuss the ill effects of immigrants but soon realized the problem is poor policy.
We must not confuse poor policy with immigration. It has been suggested that California is bankrupt because of immigrants. In fact, some areas of California’s economy are strained while other areas thrive disproportionately. How can this happen? This is the result of poor policy in economic distribution. On the other hand, California has also grown to be the world’s fifth largest economy on a diet of immigrants.
Another example was made of immigrants receiving an EIFS contract because of a lower price, but they were not as knowledgeable and skilled. They also were uninsured and did not pay taxes. How can a general contractor give an EIFS building to the owner when the work is not insured? How can an EIFS supplier joint check materials to someone with no insurance and no business license? This is the result of poor policy in business. On the other hand, legitimate companies have developed themselves and their employees into knowledgeable, skilled, insured, tax-paying organizations on a diet of immigrants.
Poor policy is the problem. The U.S. economy needs immigrants—always has and always will. But as with good nutrition, we have good eating policies. With bad nutrition we have bad eating policies and end up with heartburn. So far we have ignored the immigrant issue, hoping it will go away. But that has caused strain in some areas of the economy while disproportionately enriching other areas? The AFL-CIO tried to exclude illegal immigrants in 1986 but has since reversed its position to embrace them. What about keeping immigrants under your thumb for as long as possible? But then what? Will they come back to bite your hand off? Will they start their own business and destroy the market by circumventing the system and with labor-subbing, bad pricing, poor quality workmanship, improper insurance and tax reporting?
What’s the solution? There seems to have formed three camps of thought concerning immigration: Ignore them, keep them down, or embrace them. Ignoring them and keeping them down is not working. What about embracing them? We could welcome them and indoctrinate them, creating partners and allies that work within the system. After all, it’s worked well for us in the past. Such a plan would require new policy, education, open dialogue and a presence of organization to shape a stronger economy. But who should take the initiative? We all should. Call your congressman, call your senator, call your customer, call your EIFS supplier and request policy changes for a better economy.
Immigration: The Labor Brokers POV
By Brentt Tumey
Director of Operations
MSI Inc. (Managed Subcontractors International, Inc.)
We have heard both sides of the immigration reform bill and wish to express our views.
There are those who wish to send all the illegal immigrants home without exception, and those who wish to work with the system and offer a path to those who wish to stay. Through our years we have heard that the Mexicans just come here to take American money home, they don’t care about America, or they are just plain criminals for entering here without America’s permission.
We could go into the details of each opinion, but we think there is a very good option that hasn’t had much attention: the widespread abuse of the "1099 independent subcontractor” classification (individuals working at an hourly rate who do not receive overtime payments or have taxes deducted from their check). This practice is the drywall industry’s "labor broker” standard payment process to their workers, and it should be redefined.
There are so many drywall contractors out there who rely heavily on these brokers to supplement their labor needs and everyone knows—or should know by now—the ramifications of the individual independent subcontractor classification. Number one, there are no federal and state withholdings, nor matches made by the employer to the government that could account for millions of dollars a year in additional tax revenue, social security payments, unemployment insurance payments, etc. Our federal and state treasuries lose hundreds of millions of dollars in lost tax revenues. Seems like a no-brainer to us.
Then we get into the issues of insurance and unemployment, but more specifically, workman’s compensation. We are fully confident in making the following accusation: Most labor brokers in our industry do not have correctly written state mandated workman’s comp insurance, and we would bet that if you contacted the labor broker’s insurance company that their ACTUAL payroll and ACTUAL manpower dollars being reported are far from the truth.
Our country is losing even more tax dollars from the taxable revenue the insurance companies are losing. We all know this, but because of the size and schedule of projects these days we need the labor and "it is the other guy’s problem.” Sounds like the people complaining about the immigrants should be talking to their peers and doing what it takes to eliminate this practice and hold them accountable. It doesn’t do a damn thing if there are only a few out there doing the right thing. We know from experience that following the rules affects your ability to be competitive and recruit better labor, but we are firm in our belief that we are doing a justice to our country and industry by providing only W-2 employees. Sure, we [MSI] have lost many workers because now they would bring home a couple dollars less than before due to taxes and, yes, we have lost several customers because we had to raise our rates to accommodate the matches and overtime, but it is the right thing to do.
Out of all the customers we’ve serviced over the years, only a handful feel the way that we do and were willing to cut into profits and risk losing jobs because of higher bids. You know who you are and we salute you for your decision to stick with us because you also believe in our effort to correct our market for America’s best interest. We fight daily to keep our crews because XYZ Labor Broker is right there offering $15 straight time, no overtime and no taxes. Companies that use brokers who pay this way only add to our immigration problems, tracking and our country’s financial deficiencies. It is very hard to make the choice to follow the rules and/or use a vendor that does when you have the GC climbing in and out of every orifice you have, screaming for more manpower. But that choice must be made by the industry as a whole. The harsh reality is that we depend on the immigrant workers and unless we are willing to make the changes and show an effort to police ourselves, we may find an immigration bill that throws our necessary manpower back over the border.
This is only a small piece to immigration reform, but it puts us one step closer to the solution. Change is difficult; there is no one disputing that fact. Will this idea solve our nation’s immigration problem? Probably not. Will it help put millions of dollars into America’s system that so many people say is being robbed? No doubt about it. Will workers paying taxes, receiving overtime payments, protected with unemployment benefits, social security and possibly health insurance feel more invested? Don’t we as Americans?