From The Wall Street Journal:

On a West 57th Street construction site, nonunion workers in orange vests are building the foundation for a tower that will surpass the Empire State Building in height on a site scarcely bigger than three townhouses.

Even five years ago, it was unimaginable that a developer would defy the city’s powerful construction unions, led by Gary LaBarbera, and try to build a complicated Manhattan building without relying entirely on his members.

“In the heart of Midtown, when I started my working life, that was not possible,” said Edward Ott, a distinguished lecturer in labor studies at the . He called the project “a significant problem” for labor and Mr. LaBarbera.

Developers’ increasing willingness to work with nonunion workers has been prompted by rising construction costs, an increase in foreign investment and ownership that has upended long-term loyalties, and a pool of nonunion workers now capable of building high-rises.

In this context, Mr. LaBarbera, 6 foot 2 inches tall with a Long Island accent and a booming voice, would seem on first meeting to fit the stereotype of the union boss knocking heads together.

“He looks like somebody out of central casting when you think of a labor leader,” said John Murphy, business manager of Plumbers Local 1 in New York City, who said that initial impression belies his willingness to negotiate.

But one of Mr. LaBarbera’s frequent sayings—“We are negotiating with the market”—suggests an understanding of business realities that might have seemed anathema to union leaders of old.

Mr. LaBarbera, 55 years old, had been involved with the Teamsters since 1981, starting as a forklift operator. He met his wife in high school and they have three children, including a son who works in construction. Few could recall him taking a day off.

During his time as the city’s top Teamsters official, he was credited with cleaning up corruption and getting rid of the influence of the Gambino crime family.

In 2009, he resolved an internal union dispute alleging that he turned a blind eye to an employer that failed to make payments into the union’s benefit fund. Under the resolution, Mr. LaBarbera, who said he had no intention of seeking office in the Teamsters local in the future, agreed not to do so.

That same year, he was appointed president of the Building and Construction Trades Council, an umbrella organization of 15 local affiliates of national and international construction unions that operate in the city.

At that time, the real-estate downturn had left many union members out of work. And now, even as real estate has boomed, labor hasn’t returned to its former dominance. Its challenges are long-term.

Richard Lambeck, chair of the graduate construction management program at New York University’s Schack institute of Real Estate, estimated that about half of private-sector construction work in the city is done by unions, compared with 80% to 90% just 15 years ago.

In the case of the West 57th Street project, which is being developed by Michael Stern, Mr. LaBarbera is defiant. “I don’t think he is going to be able to pull it off,” he said in an interview at his offices on West 23rd Street.

He said that he had approached Mr. Stern and tried to strike a compromise known as a project labor agreement, which provides flexibility about workers’ schedules and in some cases wages and benefits.

Mr. Stern, founder and managing partner of JDS Development Group, said that he wasn’t antiunion but that right now the cost difference was too steep. He said the difference can be as much as 30% to 40%, including wages and work rules.

“Gary is the CEO of Blockbuster video,” said Mr. Stern. “He needs to find a way to adapt and become Netflix.”

Mr. LaBarbera said his decision to negotiate compromises on work hours and wages allowed projects to move forward that otherwise would have stalled. In one case, he negotiated a deal covering 150 workers with Forest City Ratner Cos. to allow modular construction on the first residential tower near Barclays Center in downtown Brooklyn.

“People told me it would be a cold day in hell or it would be an impossible feat to get the unions’ head around modular construction,” said MaryAnne Gilmartin, president and chief executive officer of Forest City. Ms. Gilmartin said that Mr. LaBarbera was ultimately convinced that modular would open a new avenue of business for unions.

Developers complain that the cost savings from such agreements aren’t nearly as robust as the 10% to 20% that unions have touted. Mr. LaBarbera said that contractors aren’t always administering the agreements to deliver the fullest cost savings.

“We are being very pragmatic, being very realistic about what’s happening in the industry. It is our desire and my desire to figure out solutions,” he said.

In some cases, unions are making up some lost ground by pursuing more government work and affordable housing projects.

Mr. LaBarbera has started reaching out to unlikely allies—advocates for minorities and low-income New Yorkers. Together they are pushing for the creation of a pre-apprentice stream, where a new group of workers would be paid 40% lower wages at affordable-housing projects, bringing in more local residents and women and minorities.

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