The truth about the U.S. economy: Broken social bargain with American workers led us down this path

Right-to-work is good for lowering wages, not much else

Trades in full court press to renovate Crisler Arena

Where’s the bounce? Recession’s anchor has hold on construction

Not much movement in May; jobless rate hits 16 percent

Don’t pin productivity problems on workers, study says

NEWS BRIEFS

The truth about the U.S. economy: Broken social bargain with American workers led us down this path

By Robert Reich
Fmr. U.S. Secretary of Labor

The U.S. economy continues to stagnate. It’s growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere.

It’s vital that we understand the truth about the American economy.

How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?

The Great Prosperity. During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward.

During these three decades everyone’s wages grew – not just those at or near the top.

Government enforced the basic bargain in several ways. It used Keynesian policy to achieve nearly full employment. It gave ordinary workers more bargaining power. It provided social insurance. And it expanded public investment. Consequently, the portion of total income that went to the middle class grew while the portion going to the top declined. But this was no zero-sum game. As the economy grew almost everyone came out ahead, including those at the top.

The pay of workers in the bottom fifth grew 116 percent over these years — faster than the pay of those in the top fifth (which rose 99 percent), and in the top 5 percent (86 percent).

Productivity also grew quickly. Labor productivity — average output per hour worked — doubled. So did median incomes. Expressed in 2007 dollars, the typical family’s income rose from about $25,000 to $55,000. The basic bargain was cinched.

The middle class had the means to buy, and their buying created new jobs. As the economy grew, the national debt shrank as a percentage of it.

The Great Prosperity also marked the culmination of a reorganization of work that had begun during the Depression. Employers were required by law to provide extra pay – time-and-a-half – for work stretching beyond 40 hours a week. This created an incentive for employers to hire additional workers when demand picked up. Employers also were required to pay a minimum wage, which improved the pay of workers near the bottom as demand picked up.

When workers were laid off, usually during an economic downturn, government provided them with unemployment benefits, usually lasting until the economy recovered and they were rehired. Not only did this tide families over but it kept them buying goods and services – an “automatic stabilizer” for the economy in downturns.

Perhaps most significantly, government increased the bargaining leverage of ordinary workers. They were guaranteed the right to join labor unions, with which employers had to bargain in good faith. By the mid-1950s more than a third of all America workers in the private sector were unionized. And the unions demanded and received a fair slice of the American pie. Non-unionized companies, fearing their workers would otherwise want a union, offered similar deals.

Americans also enjoyed economic security against the risks of economic life – not only unemployment benefits but also, through Social Security, insurance against disability, loss of a major breadwinner, workplace injury and inability to save enough for retirement. In 1965 came health insurance for the elderly and the poor (Medicare and Medicaid). Economic security proved the handmaiden of prosperity. In requiring Americans to share the costs of adversity it enabled them to share the benefits of peace of mind. And by offering peace of mind, it freed them to consume the fruits of their labors.

The government sponsored the dreams of American families to own their own home by providing low-cost mortgages and interest deductions on mortgage payments. In many sections of the country, government subsidized electricity and water to make such homes habitable. And it built the roads and freeways that connected the homes with major commercial centers.

Government also widened access to higher education. The GI Bill paid college costs for those who returned from war. The expansion of public universities made higher education affordable to the American middle class.

Government paid for all of this with tax revenues from an expanding middle class with rising incomes. Revenues were also boosted by those at the top of the income ladder whose marginal taxes were far higher. The top marginal income tax rate during World War II was over 68 percent. In the 1950s, under Dwight Eisenhower, whom few would call a radical, it rose to 91 percent. In the 1960s and 1970s the highest marginal rate was around 70 percent. Even after exploiting all possible deductions and credits, the typical high-income taxpayer paid a marginal federal tax of over 50 percent. But contrary to what conservative commentators had predicted, the high tax rates did not reduce economic growth. To the contrary, they enabled the nation to expand middle-class prosperity and fuel growth.

The Middle-Class Squeeze, 1977-2007. During the Great Prosperity of 1947-1977, the basic bargain had ensured that the pay of American workers coincided with their output. In effect, the vast middle class received an increasing share of the benefits of economic growth. But after that point, the two lines began to diverge: Output per hour – a measure of productivity – continued to rise. But real hourly compensation was left in the dust.

It’s easy to blame “globalization” for the stagnation of middle incomes, but technological advances have played as much if not a greater role. Factories remaining in the United States have shed workers as they automated. So has the service sector.

But contrary to popular mythology, trade and technology have not reduced the overall number of American jobs. Their more profound effect has been on pay. Rather than be out of work, most Americans have quietly settled for lower real wages, or wages that have risen more slowly than the overall growth of the economy per person. Although unemployment following the Great Recession remains high, jobs are slowly returning. But in order to get them, many workers have to accept lower pay than before.

Starting more than three decades ago, trade and technology began driving a wedge between the earnings of people at the top and everyone else. The pay of well-connected graduates of prestigious colleges and MBA programs has soared. But the pay and benefits of most other workers has either flattened or dropped. And the ensuing division has also made most middle-class American families less economically secure.

Government could have enforced the basic bargain. But it did the opposite. It slashed public goods and investments – whacking school budgets, increasing the cost of public higher education, reducing job training, cutting public transportation and allowing bridges, ports and highways to corrode.

It shredded safety nets – reducing aid to jobless families with children, tightening eligibility for food stamps, and cutting unemployment insurance so much that by 2007 only 40 percent of the unemployed were covered. It halved the top income tax rate from the range of 70 to 90 percent that prevailed during the Great Prosperity to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor than of the well off.

How America Kept Buying: Three Coping Mechanisms.

Coping mechanism No. 1: Women move into paid work. Starting in the late 1970s, and escalating in the 1980s and 1990s, women went into paid work in greater and greater numbers. For the relatively small sliver of women with four-year college degrees, this was the natural consequence of wider educational opportunities and new laws against gender discrimination that opened professions to well-educated women. But the vast majority of women who migrated into paid work did so in order to prop up family incomes as households were hit by the stagnant or declining wages of male workers.

This transition of women into paid work has been one of the most important social and economic changes to occur over the last four decades. In 1966, 20 percent of mothers with young children worked outside the home. By the late 1990s, the proportion had risen to 60 percent. For married women with children under the age of 6, the transformation has been even more dramatic – from 12 percent in the 1960s to 55 percent by the late 1990s.

Coping mechanism No. 2: Everyone works longer hours. By the mid 2000s it was not uncommon for men to work more than 60 hours a week and women to work more than 50. A growing number of people took on two or three jobs. All told, by the 2000s, the typical American worker worked more than 2,200 hours a year — 350 hours more than the average European worked, more hours even than the typically industrious Japanese put in. It was many more hours than the typical American middle-class family had worked in 1979 — 500 hours longer, a full 12 weeks more.

Coping mechanism No. 3: Draw down savings and borrow to the hilt. After exhausting the first two coping mechanisms, the only way Americans could keep consuming as before was to save less and go deeper into debt. During the Great Prosperity the American middle class saved about 9 percent of their after-tax incomes each year. By the late 1980s and early 1990s, that portion had been whittled down to about 7 percent. The savings rate then dropped to 6 percent in 1994, and on down to 3 percent in 1999. By 2008, Americans saved nothing. Meanwhile, household debt exploded. By 2007, the typical American owed 138 percent of their after-tax income.

The Challenge for the Future.

All three coping mechanisms have been exhausted. The fundamental economic challenge ahead is to restore the vast American middle class.

That requires resurrecting the basic bargain linking wages to overall gains, and providing the middle class a share of economic gains sufficient to allow them to purchase more of what the economy can produce. As we should have learned from the Great Prosperity –  the 30 years after World War II when America grew because most Americans shared in the nation’s prosperity – we cannot have a growing and vibrant economy without a growing and vibrant middle class.

(This is excerpted from my testimony to the U.S. Senate Committee on Health, Education, Labor, and Pensions, on May 12. It is also drawn from my recent book, Aftershock: The Next Economy and America’s Future.)

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Right-to-work is good for lowering wages, not much else

With a few Republican-sponsored right-to-work bills waiting in the wings for legislative action in Lansing, organized labor is hoping the GOP won’t have the stomach for taking on such a divisive issue, but no one knows until the voting starts. Below is more ammunition against making Michigan a right-to-work state.

By Gordon Lafer

Sen. Jim DeMint (R-S.C.) has a new study touting his state’s “right to work” environment as a model of economic development.          

But the truth is DeMint is promoting policies that force hard-working Americans to compete against each other for low-wage jobs with scant benefits and no hope for a secure retirement. DeMint’s study claims that states with “right to work” laws – which make it harder for workers to join unions – have better economies than the rest of the country.

He points to high population growth in the 22 right-to-work states – implying right-to-work laws are the cause. But this is nonsense. Warm weather and sunny beaches have more to do with why retirees flock to Florida and Arizona than labor laws.

What do you get when you take the warm weather out of the right-to-work equation? You get Iowa – the only right-to-work state in the industrial Midwest. And how has Iowa done economically? Over the last 30 years, Iowa has ranked 46th out of the 50 states for job growth.

DeMint’s promotion of South Carolina as a model for economic development also flies in the face of economic reality. If we compare South Carolina with New Hampshire – where “right to work” legislation is facing a vote in the state legislature – we find that by any measure, South Carolina should be trying to figure out how to be more like New Hampshire. Not the opposite.

At the end of 2010, South Carolina’s unemployment rate was 10.7 percent – nearly double that of New Hampshire. South Carolina’s poverty rate is also double that of New Hampshire; while its median income is $23,000 lower.

The rate of new business openings was 25 percent faster in New Hampshire than in South Carolina. When it comes to “new economy” firms – the high-tech, high-wage employers that every state seeks – New Hampshire is ranked No. 11 most attractive in the country, while South Carolina ranks No. 39.

But any economist knows that comparing the average economic performance of diverse states that share a single law is not an exact science. Other economic factors must be weighed. After all, if average growth rates were all that mattered, DeMint should be urging us to emulate Scandinavia – whose economic growth significantly outpaces our own — and where more than 70 percent of workers are union members.

In fact, what scientific analysis of right-to-work laws reveals is the opposite of DeMint’s suggestion. These laws have no effect on job growth. But they do lower wages – for both union and non-union workers – by about $1,500 per year, even after accounting for cost of living differences. They also lower the likelihood that workers will have access to health care and a secure retirement through their jobs.

This fits with the primary goal of right-to-work laws: to lower wages in order to lure out-of-state manufacturers. But to the extent this strategy may have worked in the 1970s or 1980s, it does not today. In the global economy, companies looking for cheap labor are likely to move to China or Mexico, not Iowa.

DeMint is entitled to his anti-union opinions. But lawmakers are entitled to know the difference between scientific fact and passionate ideology. The record shows that right-to-work laws lower living standards while doing nothing to increase jobs.

(Mr. Lafer is a professor at the University of Oregon and a research associate of the Economic Policy Institute. He is the author of Does Right to Work Create Jobs?)

Trades in full court press to renovate Crisler Arena

By Marty Mulcahy
Managing Editor

ANN ARBOR – Crisler Arena, home of the University of Michigan men’s basketball team, looks much as it did when it was completed in 1967.

But now, like the neighboring U-M football stadium, which has undergone an incredible renovation and expansion over the past decade, Crisler Arena is getting a modern makeover which is so extensive it needs to be phased in over several basketball off-seasons.

The ongoing $20 million first phase, according to U-M, is addressing “highest priority infrastructure needs,” such as repair of the roof, electrical, plumbing and air handling systems. Lower bowl seating will be reconfigured to allow for the expansion of seating for people with disabilities, addition of handrails and other code- related issues.

The second $52 million phase will add approximately 63,000 gross square-feet for new fan entrances, additional retail spaces and ticketing areas, as well as a private club space. The renovation will improve seating for people with disabilities and provide expanded and renovated concourses to allow for an increase in restrooms, concessions and other fan amenities. The building will be air conditioned for the first time. And all seats throughout the arena will be replaced.

Clark Construction is acting as general contractor on the first phase of the project, which began in early April. An average of 120 Hardhats a day are working at the arena over two shifts. Last month the building was devoid of seats and the hardwood court was removed, with the concrete subfloor floor used as a lay-down area for ventilation system hardware and other construction activity.

“We’re really moving, there are a lot of things to take care of in a short amount of time,” said Clark Construction Project Manager Rick Hutter. He said one of the first major deadlines is the scheduled June 24 installation of the new seats – and to keep them clean, any construction that causes flying dust is going to have to be finished or contained.

“It’s a big area we’re working in, but with the amount of work we have to do in our schedule, we have to stagger our work a bit so we’re not working on top of each other,” Hutter said. “We’re very happy with the tradespeople here, we have a very good construction crew; everyone is working as a team.”

Specifically, some of the tasks on the to-do list for the trades in this phase include step replacement in the seating area to accommodate some seat realignment, new handrails, construction of a television camera platform, addition of luxury seats in three areas, adding spray fire protection in the concourses, removing old air handlers and adding new ones, adding exhaust fans to evacuate smoke in the case of fire, replacing the roof, and beefing up steel in the catwalk.

Hutter showed off one of the building’s quirks – a landfill directly underneath stands in the arena’s northwest quadrant. Instead of it being taken off-site, a significant amount of fill dirt from when the arena was originally constructed was simply left behind. During this renovation, some of the dirt, but not all, is being removed to allow for the creation of storage space, as well as a private entryway to the football stadium. A concrete slab will be poured in the space, “and it will be some pretty expensive storage,” Hutter joked.

Former U-M Athletic Director Bill Martin told Ann Arbor.com that that university did consider for long replacing, instead of renovating, Crisler Arena. “We looked at it,” he said. “But understand to begin with that Crisler has good bones. It’s sized right. Structurally, it’s very sound and it’s going to last a long time.”

He called the renovation “just a big overhaul. This is like taking the engine out of your car, overhauling it, putting in all different parts and putting it back together again.” When the renovation is complete, Crisler Arena’s 13,751-seat capacity is expected to be reduced by a couple hundred.

 Named for famed football coach Hebert “Fritz” Crisler, the arena’s public areas haven’t changed much since it opened, but renovation projects have gone on, mainly behind the scenes. Over the past 12 years, the men’s and women’s locker rooms have been renovated, a new weight room and media production studio were constructed, the court has been redesigned and refinished, and some seats have been added.

“We really haven't done any infrastructure work in the arena since its construction 40-plus years ago,” said Martin, before his departure, “and this will be a major step forward in improving our basketball facilities.”

COMPLETED IN 1967, U-M’s Crisler Arena is undergoing its first major renovation.

THREADING A CONDENSATE pipe at the Crisler Arena project is Billy Kohler of Plumbers and Pipe Fitters Local 190. He’s working for John E. Green.

PICK AND ROLL: Mike Dostillo of Sheet Metal Workers Local 80 and Ventcon rolls a 54-inch duct into place on the floor of Crisler Arena. It will be placed 125 feet above the floor as part of the arena’s new ventilation system.

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Where’s the bounce? Recession’s anchor has hold on construction

When it comes to recessions, the U.S. economy isn’t bouncing back quickly. And there’s little prospect for any near-term spring in the steps of job creation in the construction industry, along with those in finance and state and local governments.

So says a report last month by The Conference Board, a global, independent business membership and research association, which found that no job sector has been nearly as hard-hit as construction during the Great Recession. And based on historical trends over the last 50 years, hiring in construction and in other sectors has shown little proclivity to come back quickly after recessions.

“When looking across industries, the current recovery is showing some unique trends,” says Gad Levanon, Associate Director of Macroeconomic Research at The Conference Board, and author of the report. “For example, employment in construction, finance and state/local government is not only declining, but declining much faster than in any other recovery since 1960. The decline in these industries is a result of forces that go beyond the ups and downs we see in typical recessions, and a strong bounce back is unlikely in the near future.”

Since the 18-month recession “ended” in June 2009, the entire U.S. economy has added only 1.3 million jobs, making it an extremely weak recovery.

But since that time the number of jobs in construction (-8.1 percent), finance (-1.8 percent), and state and local government (-1.0 and -2.6 percent respectively) have continued to decline.

The current recovery is the second slowest on record since 1961 – continuing a trend that began in 1991 of post-recession weak growth in both jobs and Gross Domestic Product. In the last three recoveries, neither GDP nor employment “roared back” as was typical after earlier downturns, The Conference Board said.

In the near-term, employment growth “will continue to be slow,” The Conference Board said. Overall unemployment is likely to remain above 8 percent through 2012. The Conference Board forecasts GDP to grow at about 2.5 percent in 2011 and 2012, much lower than the rate of 3.5 to 4 percent typically reached during expansions.

Adds Levanon: “Longer-term prospects are more promising, however. In the last six months, employment outside of construction, finance and state and local government has already been growing faster than nearly any other six-month period in the last decade. Once constraints in these hard-hit sectors loosen, overall job recovery is likely to pick up pace.”

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Not much movement in May; jobless rate hits 16 percent

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Don’t pin productivity problems on workers, study says

How do you measure and improve construction worker productivity?

Anyone who has spent 20 minutes watching a construction site quickly grasps what people who have been in the business 20 years already know – it’s extremely difficult. Many different craft workers toiling in multiple areas of a site performing unique tasks on what’s likely a one-time project make for tough-to-measure productivity markers.

Tough, but maybe not impossible. In 2009 the Construction Industry Institute (CII) at the University of Texas at Austin began a five-to-six year research project aiming to “improve construction worker productivity in order to reduce costs, mitigate skilled labor shortages, and improve project schedule performance.” Some results are coming in, and they’re casting Hardhats’ work habits in a favorable light. On June 1, the Engineering News Record published a related article on the CII’s Craft Productivity Improvement Program titled, “Don’t blame the workers.”

“Equipped with stopwatches and PCs to crunch their data,” the ENR article said, “big owners, contractors and university researchers have turned to measuring and charting disruptions that can hit a jobsite daily. By drilling into the workday minute by minute, gauging output with new precision and zeroing in on ways to turn downtime into wrench time, researchers are cutting through the fog of confusion over what takes place on jobsites and, in the process, dispelling myths about lazy workers. Now, a major question is what to do with the rich harvest of activity data and how to exploit it consistently. A few measurement-minded companies are learning how.”

A few highlights from the article and other sources on the subject:

*Union work rules aren’t seen as a productivity problem. Unfortunately, much of the reason fingers aren’t being pointed at unions is the decline in union market share.

*Watching workers’ work habits can make them feel self-conscious, until they understand they’re partners in the process.  Productivity Enhancement Resources, a consultant to contractors, said “we assume that the vast majority of the craft workforce strives to be productive and true productivity improvement will result when project management removes the barriers to productivity. Once the barriers are removed, the workforce can and will work more efficiently.” PER President Chris Buck told the ENR: “Crafts guys want to be productive.”

*So why not ask workers what they need to be more productive? In fact, they have been surveyed, in a 2006 study by the same Construction Industry Institute of nearly 2,000 construction workers. “The findings,” said the American Society of Civil Engineers, “show that craft workers do have a good understanding of the factors affecting their daily productivity, and most of the adversarial factors affecting productivity can be addressed by site management teams. Factors involving tools and consumables, materials, engineering drawing management and construction equipment were identified as having the greatest impact on productivity from the craft workers’ perspective.”

*The ENR article mentioned a number of anecdotal ways contractors are seeking to improve productivity, and most seem to involve putting workers closer to tools and materials, while making the hardware easier to find and transport. Closer proximity to break areas and porta-johns also helps. One suggestion for the summertime involved moving work to cooler, shady areas of a site to increase productivity.

There are also worker frustrations about time wasting due to “unclear plans and specs, fixing prefabricated items and looking for tools,” the ENR article said.

*A 2009 paper by researchers at the National Institute of Standards and Technology found that in all non-farm U.S. industries, productivity has increased by an average rate of 1.8 percent per year over the last 40 years. During that time in construction, however, labor productivity declined by 0.6 percent per year.

They cited prior research showing construction productivity declines as the result of the lack of research and development spending, fragmentation within the industry, and declining real wage rates.

The Construction Industry Institute incorporated an article by Rick Haller, president of Detroit-based Walbridge, who similarly didn’t point fingers at the workforce regarding increasing productivity. Instead, he said “front end planning” was the key to success, for example, in the completion last year of the University of Michigan’s new $152 million North Quad building.

The Construction Industry Institute’s research in productivity, Haller wrote, “are fundamental to our continuing success, especially the best practices in the areas of front-end planning, constructability reviews, materials management and zero accident techniques.”

When its study is completed, the CII has an ambitious goal to “identify and validate through field trials or other validation methodologies, initiatives, techniques, or methods that, if implemented would result in a craft productivity improvement of 50 percent.”

In 2009, the Construction Industry Institute, based at the Cockrell School of Engineering at The University of Texas at Austin,

The objective of this research program is to identify and validate through field trials or other validation methodologies, initiatives, techniques, or methods that, if implemented would result in a craft productivity improvement of 50 percent. This research will require a comprehensive research program of five to six years rather than be the focus of a single research project. CII’s Research Committee will review the program at a minimum annually to ensure quality and satisfactory progress and to approve the selection of the next project to be undertaken in the program.

This research aims to improve construction worker productivity in order to reduce costs, mitigate skilled labor shortages, and improve project schedule performance. Improving the percent of time spent on direct work will be the initial strategy. To do this, specific objectives must be achieved.

Specific Objectives of the Research

• analyze CII BM&M productivity and other data annually with a focus on year selected trades.
• conduct annual innovation workshops, each focused on a specific CII BM&M trade, in order to identify innovations with breakthrough potential.
• conduct an annual set of field trials focused on the most promising innovation identified in the immediately preceding workshop.
• starting in 2009, report out annually at the CII conference and deliver at least one useful research product annually.
• synthesize the best work on change management and the effective implementation of innovations in construction.
• deliver a comprehensive productivity improvement guide at the end of the research program that would synthesize what had been learned over the course of the program.

June 1

Craig DeFinis enjoys watching a craftsperson lose 15 minutes of work time about as much as he likes discovering that he just left his wallet in the back seat of a taxi. As the owner of Pittsburgh plumbing and HVAC contractor DeFinis Mechanical Contractors, he grants his union plumbers a quarter-hour morning break, even though his contract doesn’t require it, and hopes the workers don’t stretch it the way the half-hour lunch break sometimes goes to 45 minutes. Because each worker costs about $60 an hour in wages and benefits, extra minutes add up over the long run. “Multiply that by eight guys, five days a week, for six months—that’s a lot of money,” he says.

DeFinis does more than gripe about breaks. He holds meetings with foremen every week to ensure timely delivery of tools, materials and information to his crews. Further, he stays alert to errors in the plans his crews work from. “Some engineers are better than others,” he says.

Overall, DeFinis reflects both the old and new ways of thinking about wasted work time. From the 1960s through the 1990s, owners, contractors and academics noted with frustration and alarm a steady lag in productivity within the construction industry, especially in periods of inflation. While technology had driven increased non-farm productivity ahead by 200% from 1964 to 2003, one controversial study showed, construction in the same period actually slipped by nearly 20%. Years ago, fingers may have pointed to union work rules and contract terms as factors, but a decline in trade-union market share in the last 30 years has changed that argument.

With a few exceptions, new research on productivity is giving managers the tools to maximize “wrench time.” Equipped with stopwatches and PCs to crunch their data, big owners, contractors and university researchers have turned to measuring and charting disruptions that can hit a jobsite daily. By drilling into the workday minute by minute, gauging output with new precision and zeroing in on ways to turn downtime into wrench time, researchers are cutting through the fog of confusion over what takes place on jobsites and, in the process, dispelling myths about lazy workers. Now, a major question is what to do with the rich harvest of activity data and how to exploit it consistently. A few measurement-minded companies are learning how.

In 2009, the Construction Industry Institute, based at the Cockrell School of Engineering at The University of Texas at Austin, launched the most ambitious study of craft productivity in its 28-year history. The five-year Craft Productivity Improvement Program aims to compile a comprehensive collection of innovative analysis techniques, common metrics and best practices for craft productivity.

The new research team, called RT 252, determined that project teams lacked a sufficient understanding of the issues that keep crafts workers off their tools.

Workers already had been polled on the subject. As part of a 2006 CII survey, 1,996 craftspersons listed what kept them waiting around: no forklift to move the Sheetrock, no reply from the engineer about unclear plans and specs, fixing prefabricated items and looking for tools, among other responses.

Productivity engineers argue that most contractors fail to investigate fully how these types of shortages and idle time disrupt production.

“Crafts guys want to be productive,” says Chris Buck, president of Productivity Enhancement Resources (PER) in Simpson, N.C. “You’re going to have your exception here and there, but the vast majority want to be productive. If we can take away the barriers for them to produce, they will take the reins and go.”

Buck is among a small group of productivity professionals engaged in the emerging technique of “activity analysis.” When it is hired by an employer or owner, Buck’s firm is sent to a site to make thousands of detailed observations about how crafts workers spend their time. While parsing the data and comparing it with historical norms, Buck looks for unusual spikes in non-direct work. He then goes back and interviews workers to find out why so much time is spent off-task. Once issues are identified, PER develops strategies to optimize the time of crafts workers.

The on-site observations produce mountains of data. Between March 2009 and February 2010, PER made 74,000 observations open-shop crafts labor on a Gulf Coast refinery project. The study led to an implementation plan that reduced total travel time for employees of an EPCM firm by 16% and cut operator idle time by 49% by taking downtime and using it for inspections of rigging equipment, cleaning of cranes and other machinery, and planning for lift coordination during the shift, says Beck.

PER then analyzed personal delays by the hour, showing a spike in the second half of the shift when temperatures were higher, he adds. So Beck advised supervisors to plan and schedule activities in the shade provided by existing structures, moving from one side of the project to another during the day.

The concept of observing direct and non-direct work rates isn’t new, but activity analysis represents an evolutionary step in productivity science. In the 1920s, Leonard Henry Caleb Tippett developed the “snap reading” method, which calculates the ratio between production and delay based on observations of work activity. Over time, some contractors began to gravitate toward the work-sample method, which splits a worker’s time into direct work, support work and delay.

Categories of Work

Through activity analysis, productivity engineers take sampling several steps further, breaking work into multiple layers that allow for more focused study. In July, CII’s RT 252 team released a comprehensive “Guide to Activity Analysis.” The guide suggests seven prime categories of work: direct work, preparatory work, materials handling, waiting, travel, personal, and tools and equipment (see above). Each category can be broken into subcategories to add detail.

To date, activity analysis has developed largely in silos in which companies have developed definition sets to meet their specific needs. Faithful + Gould, Seal Beach, Calif., established its own work-sample methodology, dubbed Time on Tools, in 2003. Dan Leng, vice president at the cost-management consultancy, says the system breaks non-direct work into nine main categories as well as smaller subcategories.

Although activity analysis appears laborious, Leng maintains that it is necessary in order to root out specific problems. Processing of permits, for example, can be broken down into many separate activities. “We break it down into type of permit, time waiting for someone to sign a permit, the signing process and so on. Eventually, you discover that a key person on the permitting process is constantly running 30 minutes late to sign a permit, for example.”

The payoff for micro-level information can be significant. Leng says his system saved $1.7 million by cutting logistics delays in half on a major turnaround job at a refinery, saved $835,000 by reducing breaks to 30 minutes from 55 minutes, and saved $330,000 by reducing by 10 minutes the owner “pep talk” during all-hands meetings.

“To me, it’s the most basic thing,” Leng adds. “If you have a project with 30% direct work, why would you spend time and money improving that direct work when you can try to fix the 70% [not spent on task]?”

Identifying issues is only the first step, notes Steve Toon, productivity engineer at Bechtel. Toon says activity analysis needs to be an ongoing process of assessing problems and applying solutions.

“The thing that is not addressed with traditional work sampling is what to do with the data,” he says. “We need to identify solutions, implement those solutions and follow up with another study to either validate that those solutions addressed the issue and increased productive time or [find ways to improve].”

In a typical two-day period on a Bechtel site, Toon says, he might collect 2,000 observations to serve as indicators of possible problems. He then surveys workers and foremen in the field to identify common restraints that cause delays. Armed with that data, he crafts solutions and presents them to the site manager and the project superintendent.

“You’d be surprised how many times we sit down and I’ve seen [managers] have an epiphany,” he says. “Often, I come in with a set of data that validates everything they thought, but now they have the data.”

Not everyone likes being watched. Mark Stofega, principal construction support engineer at Fluor, says workers think he is “checking up on them,” when, in fact, he usually seeks management-based problems.

“When you explain the process, there are very few things you can blame on the [crafts workers] other than late starts or early breaks,” he says. “What you find are management issues—the materials aren’t there, designs aren’t there, equipment is not there. All of a sudden, the [crafts workers] see what you’re doing, and they open up.”

Just as researchers hope to get better at identifying productivity issues, work is under way to develop a framework for applying effective solutions. As part of the first phase of CII’s project, the RT 252 research team is investigating the relationship between craftsperson productivity and best practices. For example, CII maintains a benchmarking and metrics database that is used to identify possible best practices.

In the first of the project’s five phases, the team focused on the mechanical trades. It reported a significant relationship between improved productivity and best practices in materials management, safety, team building, front-end planning, and automation and integration. Research showed that projects that were “advanced implementers” of these practices experienced as much as a 50% average productivity advantage over “weak implementer” projects.

The team’s analysis of electrical crafts produced similar results, indicating that the more productive projects are associated with a high level of safety-program implementation, automation and integration of information systems, materials management systems, team building and constructibility.

The practices are proven, and CII acknowledges that many have been known for years, such as short interval planning and work packaging. Still, the team says those solutions are rarely “implemented completely or consistently from project to project.”

Index of Best Practices

Instead of supplying a laundry list of practices, the team is developing an index of best practices with weighted scores based on the relative influence of each on improving productivity. Dubbed the Best Productivity Practice Implementation Index, the system is designed to help determine which practices or combinations of practices might help drive productivity.

General contractors may find there are limits to productivity gains for contractors, owners and others that use subcontractors. The common approach among productivity experts is for each party to focus on its own part of the equation.

Rather than using activity analysis to identify issues for managers, Chris Heger, a Turner Construction project superintendent, tries to remove barriers for subcontractors. Some strategies are basic, such as keeping materials on wheels for easy transport.

Other strategies require extra effort. At a lab project site at which portable toilets weren’t allowed in clean spaces, a portable toilet was placed on three-story staging outside the facility to reduce travel time. “Those are the types of things we can do to help [crafts workers] spend more time on task,” he says.

A steel erector working at Manhattan’s One World Trade Center is taking a similar approach. DCM Erectors, New York City, has arranged for a Subway sandwich shop to operate from a platform that is jacked to rise with the skyscraper’s steel frame, thus helping the ironworkers avoid a trip of as much as 30 minutes down to the street to find lunch.

Heger’s primary tool is tracking performance through the development of detailed work “breakdown structures” for subcontractors. The team focuses on the most predictable aspects of the job and breaks tasks into short intervals to help stay on top of issues. If performance begins to slip, the team can quickly investigate and work toward solutions.

Although it is a team approach, Heger says crafts workers can be left to themselves to improve their productivity. “Crafts workers know how to do their jobs better than anyone. I try to set them up for success rather than try to avoid failure.”

Just as with safety, top-down pressure, rather than bottom-up initiatives, may be needed to force change, says Paul Goodrum, associate professor of civil engineering at the University of Kentucky and a member of RT 252. “In the end, it will take some leadership from government agencies to push this forward,” he says. “We’ll begin to see good breakthroughs on productivity once we get some reliable measures on it. I don’t think [the challenge] is as difficult as people think.”

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NEWS BRIEFS

Prevailing wage gets some GOP support

Several states governed entirely by Republican lawmakers, including Michigan, seem poised to overturn statewide prevailing wage laws on taxpayer funded construction projects.

But anti-prevailing wage sentiments have been much more muted on the federal level. The federal Davis Bacon Act, which requires the payment of prevailing wage to construction workers on federally funded construction projects, has in recent years repeatedly garnered fairly significant Republican support during various calls for its repeal.

The latest example took place on June 2, when the U.S. House debated and voted on a Republican lawmaker’s amendment to a Homeland Security Appropriations Bill that would have struck Davis-Bacon requirements. With the support of 52 Republican lawmakers, the amendment was defeated, 234-183.  A single Democrat from North Carolina voted to remove Davis-Bacon requirements.

Three Republican congressional representatives from Michigan supported Davis-Bacon: Thaddeus McCotter, Candace Miller and Fred Upton.

There was less Republican support for the federal use of project labor agreements, which President Obama has “allowed” but not mandated through an executive order. (Obama’s order overturned President G.W. Bush’s executive order disallowing PLAs).  Rep. Steve Scalise (R-LA) offered an amendment to prohibit consideration of the use of PLAs by federal agencies. The anti-PLA measure was defeated by a 213-207 margin, with 28 Republicans voting with Democrats in support of PLAs, and a lone Democrat from Oklahoma voting with Republicans.

Two Republican congressional representatives from Michigan supported PLAs: McCotter and Upton.

Neither House measure would have made it though the U.S. Senate, which is Democratically controlled.

“This is our second victory in the U.S. House of Representatives this year on PLAs,” said AFL-CIO Building Trades Department President Mark Ayers, “and we expect future PLA votes. The Building Trades Department and its Legislative Task Force will continue its outreach efforts to Democrats and all key Republicans to protect the President’s Executive Order and the ability of federal agencies to implement it. This was a significant victory for all building trades unions!”

Tough reality for union numbers

Some blunt talk came from Laborers International Union General President Terrence O’Sullivan at The Association of Union Constructors’ annual leadership conference last month.

According to the TAUC, he talked about the challenges currently facing his union: Laborers membership has dropped by roughly 30,000 over the past two years, and on average, work hours are down roughly 30 percent nationwide. Other building trades unions could be expected to report similar numbers.

“Here's a very telling statistic,” O’Sullivan said, “81 percent of our construction membership lives in 14 states and one (Canadian) province.” With numbers like that, “we can't be a viable, long-term organization.” As a result, LIUNA plans to spend roughly $250 million over the next five years on organizing. O'Sullivan noted that he has talked with Iron Workers General President Walt Wise about planning some joint organizing efforts as well.

“We want to stay strong where we are (already) strong, and focus a lot of our organizing efforts on medium-, low- and no-density areas,” O'Sullivan added

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