Construction: Roger's Roundtable

Unions usually get most of the blame for inflation in building costs—and much of the blame is merited. Labor has pressed the fragmented construction industry into huge pay boosts. In the twelve months ending last June, construction labor won wage and fringe gains averaging 10%—or 55¢ an hour. The unions have had powerful, if often unnoticed allies in the industrial corporations that order new factories built, and will pay almost anything to get them finished on time. Such corporations urge contractors to pay heavy overtime, and if the projects are struck, says George Cline Smith, a Manhattan construction economist, the company often will tell its contractor: "Settle—we will pay the price."

Last week a group of top corporate officials resolved to confess, repent and reform. They formed the Construction Users' Anti-Inflation Roundtable —quickly nicknamed "Roger's Roundtable" because it is headed by Roger M. Blough, retired chairman of U.S. Steel. It includes executives of General Motors, Standard Oil (N.J.), General Electric, Union Carbide and A.T.& T.

The group's goal, says Blough, is to achieve "stability" in the construction industry—an obvious euphemism for forming a united front of big corporations to stiffen contractors' resistance to union demands, even at the price of construction delays.

Hurting Consumers. Construction costs are also coming under attack from other directions. The Associated General Contractors of America, whose members build most of the nation's roads, dams, factories and skyscrapers, has devised a strike insurance plan that may go into effect next year. "It would help stiffen the resistance of a little guy who might otherwise cave in," says William E. Dunn, executive director of the A.G.C. Labor Secretary George Shultz has been meeting since May with Harvard Economist John Dunlop and other experts to explore ways to contain construction costs. Shultz hopes to induce contractors and construction unions to use the Federal Mediation Service frequently to smooth over their disputes before they erupt into costly strikes. Within the Nixon Administration, there is also discussion of legislation to limit the power of local unions to balk at settlements agreed to by their international unions—a prime source of trouble in construction costs.

The attack is long overdue. Economist Smith says industrial plants recently finished have cost up to 25% more than similar plants built a year ago—a stunning rate of inflation even for the construction industry. These increases eventually are reflected in the prices of goods sold by the new factories. They hurt consumers more directly by helping to force increases in new house prices, which are rising at a rate of close to 10% this year. The reason is that high wage and benefit scales established on industrial construction jobs are often applied subsequently to residential housing.