NECA TransmissionsNotes from the front lines of the electrical contracting industry

Unsustainability

Posted on May 20, 2010 by John M Grau

No, this isn’t about conservation and green energy. It’s about employment benefits.

We used to call them fringe benefits, but most people dropped the “fringe” descriptor long ago. The cost of non-salary benefits is now a major factor in overall compensation costs. Not just in the construction industry but for many large businesses and especially for most state and local governments.

News reports are full of stories of state and local budget crises. With revenues plunging, local government leaders are scrambling to slash costs. While they take the ax to road and building projects, community grants, and other discretionary programs, they are also stuck with the bill for over-promised pension benefits and gold-plated health care programs. (Actually, we, the taxpayers, are stuck with the bill).

As we focus on survival in the electrical construction industry, one lament I hear time and again is that the cost of benefits for union electricians is a significant competitive disadvantage for NECA employers. Not only are the level of benefits and their associated costs much higher than for non-union competitors, but add to that the impending costs to salvage underwater pension plans, and it makes the whole situation unsustainable.

A recent cost-containment measure applied by many health care plans is to require a working spouse who is eligible for health insurance under his or her employer to accept that coverage. After all, why should one employer pay for coverage for someone else’s employee?

The NECA-IBEW Health Care Plan recently added this requirement. Many of the participants protested because the spouse, while eligible for coverage under his or her employer’s plan, often had to pay 10, 20, or 50 percent or more of the premium cost. It was an eye-opener regarding what employers in the marketplace outside of union construction are doing. And it once again emphasizes the competitive challenge our employers face.

What’s to be done about this problem?

In some areas the solutions are already being implemented. For health care plans, it means single coverage, tiered benefits, and cost sharing. For pension plans, it involves the transition from defined benefit plans to 401(k) and similar options. Obviously, when collective bargaining is involved, the solutions are easier said than done. But in the long run, there really aren’t many other options. To stay the way we are is simply unsustainable.

About NECA Transmissions

NECA Transmissions is a collaborative effort from CEO John Grau and NECA staff to provide insight and feedback on key issues from the front lines of the electrical contracting industry.

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