New Jersey is losing at least $20 million a year in uncollected taxes because of a thriving, billion-dollar-a-year underground construction economy involving at least 35,000 workers, a report by the Stockton University William J. Hughes Center for Public Policy finds.

The illegal employment may also be responsible for New Jersey's shrinking construction wages.

Hourly construction wages in New Jersey were higher than surrounding states and much of the country in 2007. But over the past eight years, hourly wages have dropped a staggering 7.6 percent as wages increased in New York and Pennsylvania.

Union leaders said they’re frustrated by findings of the report, but not surprised.

“It’s not a level playing field. Employers are taking advantage of the system and it’s going unenforced and they’re getting away with murder,” said Rich Tolson, director of the International Union of Bricklayers and Allied Craftworkers.

“Our employers can’t compete, and when our employers can’t compete our members don’t go to work,” he said.


MONDAY: Illegal work costing NJ millions in taxes

TUESDAY: Wages decline — unions react

WEDNESDAY: How NJ can fight illegal underground economy

The report found that underground workers — those who employers misclassify as independent contractors or who they simply pay under the table — allow unscrupulous contractors to unfairly undercut their competition's bids by as much as 30 percent.

Bill Sproule, president and regional manager of the Northeast Regional Council of Carpenters, said developers and contractors who operate in the underground construction economy know they can offer reduced salaries and still make a greater profit because they’re not paying any workman’s comp policies for the workers they hire.

“That saves a contractor right off the bat 30 percent and they pay in cash, so there is no record of the transactions that are taking place,” he said.

“It’s very, very difficult for a straight-up company that’s employing people and paying them with decent wages and benefits and paying taxes to compete with these types of contractors.”

The report found that the underground economy may be driving down wages for all construction workers in the state.

Sproule says companies in the underground economy may hire a younger worker who “might be making somewhere between $70 and $100 a day and typically that’s for at least a 10-hour day. There’s no overtime out there for these workers. They’re being exploited.”

A tradesman that’s well versed could be making upwards of $125 to $200 a day, but there’s no overtime, there’s no healthcare and there’s no coverage if they have an on-the-job accident.

The Stockton report finds some workers, especially those who are undocumented, can only make about $100 a day and have no recourse if they’re not paid the agreed-to amount by the contractor because workers feel they can’t go to the police for fear of being arrested.

Tolson doesn't blame the workers living in the United States illegally.

“We represent workers and we’ll continue to do that. Our fight and our problem is with employers that are taking advantage of those that are less fortunate,” he said.

Sproule noted a big part of the problem is construction workers who are simply interested in getting paid in cash and don’t care if they’re not getting benefits, paying taxes or paying into a pension.

“Some will come to the union and sign up and they may make $30 an hour that is taxed, they’ll get benefits, but only make $675 to $750 a week after taxes so therefore they’re making more working in the shadows.”

John Capo, the secretary treasurer of the Bricklayers Administrative District Council of New Jersey, said the real heart of the problem is some companies and contractors are money hungry and just won’t obey the law.

“It’s basically greed,” he said

As a result, Tolson says “workers are being taken advantage of and contractors and developers, especially, are reaping the profits of these practices.”

You can contact reporter David Matthau at

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