California's Apprenticeship Scam
In a Free Society There Would Be No National Apprenticeship Act
DECEMBER 01, 2003 by CHARLES W. BAIRD
In 1937 Congress and President Roosevelt enacted the National Apprenticeship Act (NAA), which, sadly, is still in effect. It enables “the [U.S.] Department of Labor to formulate and promote the furtherance of labor standards necessary to safeguard the welfare of apprentices and to cooperate with the states in the promotion of such standards.”
Like most New Deal legislation, the NAA was enacted under the widespread illusion that the best way to get out of the Great Depression was to curtail economic competition. Its proponents thought there were too many apprenticeship programs, most of which were union-free, for the good of the country. The federal government in “cooperation” with the states and construction-industry unions proceeded to eliminate union-free competition in the market for apprenticeship training. However, the NAA gives the secretary of labor much discretion in setting apprenticeship standards, and in the 1980s the standards were gradually loosened to permit some union-free programs to be registered. However, to this day no registration may be granted without giving construction unions a chance to object. They don’t have veto power, but they have a strong voice in the decision process. HR 1660, now in the House of Representatives, would, if enacted, remove the requirement that unions be given a chance to object.
The NAA allows the secretary of labor to delegate approval decisions to individual state apprenticeship councils so long as state practice does not conflict with broad federal guidelines. The federal Bureau of Apprenticeship and Training makes approval decisions for the 23 states that the secretary does not “recognize” for the purpose of registering apprenticeship programs. At least some of those states are not recognized simply because they choose not to set up their own bureaucracies for this purpose. Some others have been denied recognition. California has been recognized since 1978, but it is about to become “derecognized.”
In the 1980s and through 1992, the U.S. Department of Labor (DOL) increasingly insisted that state apprenticeship councils not discriminate between union and nonunion apprenticeship programs. There was no approved union-free apprenticeship program in California until the Walther Electric Co. sponsored one in 1988. California had been restricting the approval of nonunion programs by refusing to certify nonunion apprenticeships where there were existing unionized ones. Officially a proposed union-free program would be turned down if there were no “need” for it because of an existing unionized one. This “needs test,” of course, is a common device by which regulatory bodies restrict competition from disfavored interlopers.
In 1988 the DOL threatened to derecognize the California Apprenticeship Council (CAC) because of the discriminatory needs test. The unions sued, and in December 1992, the California Supreme Court, in Associated Builders and Contractors v. California Apprenticeship Council agreed that state apprenticeship practices could be overruled by the DOL. Thereafter, until Gray Davis became California’s governor in 1999, the needs test was not used to discriminate against proposed union-free apprenticeship programs. By 1997 the market share of unionized construction workers in California (19.6 percent) dropped below the national average (19.7 percent).
The union movement pulled out all stops in its effort to elect Gray Davis governor in November 1998, and it succeeded. Thereafter, the unions presented Davis with demands for payback, and he obediently complied. Among other things, such as forcing all California State University and Community Colleges faculty as well as all K-12 teachers to pay union dues as a condition of continued employment, Davis appointed union-friendly people to CAC, the state Department of Industrial Relations, and its Division of Apprenticeship Standards (DAS). CAC and DAS jointly administer the California apprenticeship program. They soon became union front organizations that, under the cloak of statute AB 921, contrary to the 1992 California Supreme Court decision, reinstated the discriminatory needs test.
Union-Free Sites Closed
The Clinton DOL did not object. In July 2001 the CAC closed 27 union-free training sites that had been approved in 1998 simply because unions wanted them closed. In February 2002 Davis’s associates on CAC imposed apprenticeship prevailing-wage requirements on all private as well as government construction in the state thereby greatly reducing the demand for union-free apprentices whose market-determined wages were below prevailing wages. Since no construction work done by apprentices for pay less than the prevailing wage could count as training toward certification as journeymen, fewer workers were willing to enter and remain in union-free apprenticeships. It is not for nothing that Gray Davis, now recalled, became nationally known as the quintessential pay-to-play governor.
By the end of 1999 the construction-union market share in California jumped up to 25.4 percent. Since then it has remained above the national average, although both shares are falling due to the nationwide decline of unions in the private sector.
In 2001 a new secretary of labor took office, and the department began to pay attention to the apprenticeship issue. In May 2002 the DOL sent a letter to the California Department of Industrial Relations (DIR) threatening to derecognize CAC unless its discriminatory needs test was abolished. Davis appointees refused to comply and insisted on a hearing before an administrative law judge. After several delays that hearing was planned for last fall.
One would think that the 1992 decision of the California Supreme Court on precisely this issue would have settled the matter, but the unions held a lot of Davis’s IOUs, so he and his appointees claimed the right to discriminate against union-free apprenticeships in defiance of the DOL. However, in July the department declared that effective August 7, 2003, any California apprenticeship program seeking approval has the option of applying to the federal Bureau of Apprenticeship and Training rather than CAC. While CAC has not yet been derecognized, its ability to discriminate through its needs test has been circumvented.
Actually, the whole issue ought to be beside the point. In a free society there would be no National Apprenticeship Act. Apprenticeship programs would compete to obtain market share. They would attempt to build reputational capital, and competitive private quality evaluators would emerge to lower consumers’ information costs in the apprenticeship market. The contractors who hire the journeymen and apprentices of the construction trades would be keen to sort the wheat from the chaff and would produce their own quality rating services. The California dispute exists only because government is involved where it ought not to be. So what else is new?