State keeps piling on rules that increase Hawaii’s cost of living

by Keli'i Akina, Ph.D., President / CEO Grassroot Institute

The following commentary was first published by the Honolulu Filipino Chronicle on April 7, 2024.
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Politicians say they want to lower Hawaii’s cost of living, but talk is not enough.

In reality, they keep piling on rules that add to the cost of government, which leads to higher taxes and ultimately a higher cost of living.

For example, consider the “administrative directive” issued by the governor’s office in February. This new rule requires all state construction projects worth more than $1.5 million to be performed under so-called project labor agreements, or PLAs.

PLAs favor unionized contractors by requiring that bidding contractors pay so-called prevailing wages, which are set by unions. They also require contractors to abide by union terms, use union referrals, and keep good relationships with the unions.

Making things worse, the new $1.5 million threshold is a big drop from the previous $25 million, which still was not popular with nonunionized contractors but at least considered more tolerable in terms of its effect on smaller businesses.

In fact, Hawaii’s $1.5 million PLA threshold is now the lowest in the nation — far lower than Washington D.C.’s $75 million, California’s $35 million, or even New Jersey’s $5 million.

So overall, the effect of the new PLA order will be to ice out Hawaii’s nonunionized contractors from virtually all state construction contracts — and fewer bidders typically means higher project prices.

A 2019 study from the Beacon Hill Institute, for instance, found that PLAs in New Jersey increased building costs for 107 public schools by 16.25%, or $565 million.

Furthermore, a 2021 RAND Corporation study found that PLAs raised the cost of a large affordable housing project by 14%, resulting in the construction of 800 fewer homes.PLA proponents claim that the agreements protect local jobs. In Hawaii, however, more than 60% of construction workers do not belong to unions — so PLAs only apply to a minority of workers here.

Another argument for PLAs is that they help avoid strikes and other labor disruptions. But strikes are a rarity these days, and PLAs still are associated with more construction delays.

For example, a 2008 report from the New Jersey Department of Labor and Workforce Development found that the average PLA project took 100 weeks to complete, compared to 78 weeks for non-PLA projects.

The disadvantages of PLAs are so well-known that 25 states have enacted legislation or rules barring PLA mandates on government construction projects.

Meanwhile, Hawaii is moving in the wrong direction.

So, what can we do?

In the short run, the sensible thing would be for Hawaii to return to the previous PLA threshold of $25 million, or perhaps even the $35 million level used by the federal government.

In the long run, though, we should eliminate PLAs completely. Government construction projects would cost less, we possibly could see a break in our taxes as a result, and maybe fewer of our families and friends would feel the need to flee their beloved homes in search of more affordable living.