Union Opposition Stalls SWEA In U.S. House

June 5, 2002
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The Skilled Workforce Enhancement Act (SWEA) bill is not dead, but it has been delayed in Congress as the result of labor union opposition. 

SWEA would provide tax credits to shop owners to offset the costs of training employees in the highly skilled trades. The bill would affect owners of both union and private shops that provide in-house apprentice training and have 250 or fewer employees.

The bill would amend the Internal Revenue Code by allowing a tax credit of up to $15,000 per year, per apprentice, for four years. The credit would only apply to a trade that has a customary apprenticeship program period of more than two years. Eligible employers would have to provide an employee with 2,000 hours of shop and necessary classroom training each year of apprenticeship.

The bill’s backers hope that by providing employers with additional incentive to do more training in-house, the measure would help alleviate the growing shortage of highly skilled workers in the United States.

Rep. Jim Talent, R-Mo., chairman of the House Committee on Small Business, introduced the bill in May 1999 and the House Committee on Small Business held a hearing on the measure in February 2000.

Rep. Mark Foley, R-Fla., introduced the bill in the House of Representatives on March 6 this year, and the bill was promptly referred to the House Ways and Means Committee. Mike DeWine, R-Ohio, will soon introduce the Senate companion bill.

Although originally focused on the metalworking field, along the way the bill has expanded to include other trades similarly squeezed by the skilled worker shortage, including roofing, masonry, heating, air conditioning, ventilation, refrigeration, plumbing and electrical contractors. The coalition of skilled trades has now grown to 21.

Support for the bill gained steam last year, and it looked as though the measure would be a shoo-in in 2001. Interest in the bill’s passage remains high among National Machining and Tooling Association (NMTA) members and the small business community continues to support it. But labor union opposition to the bill has slowed its momentum.

It’s basically a turf battle and it’s having a negative impact, said John Meredith, Washington representative for NMTA. A few of the bill’s co-sponsors, mostly Democrats in union dominated areas, have dropped support for the bill. One Republican has defected as well, and the number of co-sponsors is down from 45 to 41 as a result.

From the perspective of labor, some of the training programs eligible for tax credit under SWEA are “lacking in quality standards” and, therefore, substandard to union training programs.

“It’s arguable because since last year we have added about four pages of qualified training program language to the bill,” Meredith said. Under the bill, BAT (Bureau of Apprenticeship and Training) and SAC (State Apprenticeship Council) certified educational programs are eligible for the tax credit, as are industry recognized programs, such as the NIMS (National Institute for Metalworking Skills) standard in metalworking.

Any program conducted by a vocational or technical school, community college or trade training organization also would be eligible.

In its recent legislative issues bulletin, for example, the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers and Helpers maintained that the definitions of qualified training programs are too broad. 

“The current language would make virtually any so-called training program eligible for the tax credit, cost several billion dollars and then would do little to address the shortage of skilled workers,” according to the bulletin.

The group also takes issue with SWEA because it shows a lack of “commitment on the part of the employer to pay for training and no accountability to make sure real training occurs.”

Some groups, like the 15 affiliated unions of the Building and Construction Trades Department, AFL-CIO, say the bill “would allow employers to have their employees trained by inferior training programs and require the federal government to pay for it.”

According to Meredith, the labor unions have a problem with anything that is not BAT or SAC certified.

There are some programs that are not BAT or SAC certified, but they are very well put together and they definitely play an important training role, such as NIMS, Meredith said.

“Therefore, it would be a problem for us to limit eligible training essentially to BAT and SAC programs,” he observed. “In essence, that would make it a labor bill as opposed to a true small business proposal.”

The Building and Construction Trades Department also contends that union programs, run under the Taft-Hartley laws, are solely funded by private funds. 

According to the organization’s president, Edward Sullivan, union programs “train hundreds of thousands of workers each year without relying on Uncle Sam for the associated costs in many of the same trades specified in HR 877, such as roofing, masonry, heating, ventilating, air conditioning, etc.”

That’s “grossly untrue,” Meredith said, pointing out that union training programs take advantage of several grants in addition to taking a tax deduction for training expenses.  

Under Section 162 of the Internal Revenue Code, employee-training expenses are deductible from corporate income if they qualify as ordinary and necessary business expenses, as opposed to capital expenses.

The SWEA tax credit and the Section 162 tax deduction are qualitatively the same so the unions cannot make the argument that the SWEA credit would be completely privately funded, he said.

“In essence, what the union opposition has done is to take a bi-partisan measure and potentially make it a Republican issue,” Meredith explained. “However, conversations with offices that are sympathetic to labor have indicated the bill is not one that will kill a bigger package. In other words, we could get SWEA attached to a minimum wage bill or some other type of tax relief package, not necessarily this year but hopefully next.”

There’s opposition and there’s posturing, Meredith said, but Congressmen have indicated with all but about two exceptions that they would still vote for SWEA as part of a package. NTMA has some labor union contacts who are doing what they can to bring the issues to the negotiating table, and the organization also is pressing for a hearing to get both sides to sit down and iron out their concerns, he said. 

According to the NMTA, it takes four years, or 8,000 hours, to train a skilled machinist, and the training adds up to more than $200,000 per individual. Most members in the NMTA operate shops with about 30 employees on average, Meredith said, and the $15,000 per year credit would provide some welcome relief.  

According to the results of a study conducted by the National Association of Counties, 75 percent of the largest counties in the U.S. report they face a shortage of skilled workers. Some 85 percent indicated the shortage had increased over the last five years, and 97 percent characterized the shortage as “serious” to “very serious.” Reportedly, sectors most impacted by the shortage are manufacturing and construction. 

The decreasing number of highly skilled workers is particularly acute in the metalworking industry, Meredith said. The Department of Labor estimates the need for skilled labor in the metalworking trades is 2 percent annually of the current workforce. But with few young people entering the industry, the percentage rises to 5 percent when the aging of the current workforce is factored in.

“We’re finding that many, many other industries are experiencing a shortage of skilled labor and, obviously, it’s not getting any better as the economy goes down,” Meredith noted.

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