(4) Beyond the Margins—Developers/General Contractors Fully Embrace These Business Practices

Our interviews have revealed a great deal about this new business model of residential home construction. We have seen how it jettisoned regularized workers employed by contractors and subcontractors, and how it relies now almost exclusively on workers supplied by labor brokers. These brokers have emerged in a very large scale in the Commonwealth and play a central role in the process. Because they have chosen to work in a cash world, the brokers, the subcontractors, and the developers who hire them have insulated themselves from responsibility for the working conditions, the safety and health, the compensation of workers, payroll taxes and benefits and the immigration status of the workers. And despite their shiny exteriors, these new housing developments and multi-unit buildings are built by workers who are hyper-exploited in unsafe and dangerous working conditions with virtually no oversight or consequences. Although labor brokers themselves are small informal entities, our research clearly demonstrates that many major developers and general contractors have fully accepted their fundamental place in the new business model, and it reveals how they have become mechanisms for generating profits.

As we saw at the North Square Apartments site in Amherst, Massachusetts, as well as in several others that utilize Metro Walls, these are not marginal projects at the fringes of the economy; they are among the largest complexes built by major developers in New England. As the former carpenter who works for a major contractor told us: “On the multi-residential jobs that are 50 to 100, to 200, 300, 400 units, every one of those (non-union) jobs is guilty for sure, because they’re importing workers from wherever, it’s just cash money hustle for sure. And there’s just no job site inspection, there’s no enforcement, there’s nothing going on. No one cares, the GC doesn’t care, no one cares because everyone’s making money, that’s it.”⁸¹

NASRCC’s Tom Flynn speaks about how this model has emerged, partly as a result of the changing economics of the building industry, particularly because of the cost of land. “In more urban areas, the price of the land is tremendous, right? … So that’s part of the economics of this is that with the land prices being so high, developers [have] also been squeezed, and one of the ways they top up their profit is again, is by communicating to their GCs and then to the subs that we have to build this cheaper. … Their investors would be demanding that they build it for as cheap as they can.”⁸²

And developers accomplish building more cheaply by adopting this new business model and using labor brokers. “Part of the business model is that general contractors know who they’re going to be working with. It’s a line of history that they got already. They know the practices of the subcontractor. And they just try to cover their eyes not knowing the reality,” Martin Sanchez an NASRCC organizer, tells us. He continues, “And they know that they can bid that project lower because they’re going to be using that guy, that company, that sub. And they know that the sub is going to be using that labor broker… I can put a bid on that project for this developer for so much amount of money less and get that project, knowing that I can hire like I did on the project before.”⁸³

Based on our interviews, we see no indication that this business model is being effectively challenged. In the Commonwealth today, developers and general contractors are insulated from any legal action, so that they continue to exploit this system, as well as the workers who actually do the construction, to increase their profits despite changes in the industry. And now that the use of labor brokers has become central in residential construction, it is virtually impossible for legitimate non-union subcontractors to compete and they are quickly disappearing. Tom Flynn suggests that this will continue at even a greater pace in residential construction, with the involvement of major lumber distributors were now increasingly becoming directly involved in large scale residential construction. He describes:

The big national developers that develop thousands of units all over the country, they want to deal with as few subcontractors, suppliers, as they can. So, they go to National Lumber and ask National Lumber to give them a price for a turnkey operation, which means that they want them to not only supply the product but also give them a cost for the labor that is going to take place to build this building. And in many cases, National or Lumber 84 they give the subcontractor a price, and they say, if you can do it for this price, you can have the job. They know full well that the only way that they can get to that price is by, misclassifying the workers or paying them in cash. The developer knows that there’s only one way for them to get to that number, and that’s for them to be cheating, but they have plausible deniability because they’re not the ones that are actually taking the bids. They’re taking the bids through the lumber yard.⁸⁴

Our interviews provide insights into the mechanisms by which this new business model operates in residential construction and the consequences it has had on workers and contractors in the industry. To offer perspective on the extent and economic costs of this illegal behavior, we now turn to a quantitative analysis of the construction industry in Massachusetts.