What is the Prevailing Wage?
The prevailing wage refers to the rate of pay that must be paid to construction workers on public works projects. The rate is set by law and is specific to both the type of work and the locality where the work is performed. Prevailing wage laws protect in-state contractors, employees, and local economies from contractors who profit off the backs of Labor by paying low wages and underinvesting in apprenticeship and safety training.
Prevailing Wages Build Strong Middle Class Communities.
Workers who receive the prevailing wage are productive members of the middle class, capable of buying homes, raising families, supporting local businesses, and paying taxes. They are also more self-sufficient, more likely to have health insurance and retirement benefits, and less likely to rely on government subsidies.
For every dollar spent on a prevailing wage project, $1.50 in economic activity is generated locally
States that have no or weak prevailing wage laws spend $360 million more per year on food stamps and Earned Income Tax Credits for blue collar construction workers than states with average or strong prevailing wage laws.
Construction workers in states with strong/average prevailing wage laws contribute over $5.3 billion more in federal income taxes (on average after credits and deductions) per year than their counterparts in states with weak or no prevailing wage laws.
Prevailing Wages Support a Safe, Skilled Workforce.
The prevailing wage attracts highly trained individuals, most of whom have spent years in apprenticeship programs perfecting their skills. It also means they work safer, and build superior products with lower maintenance costs. The prevailing wage also translates to safer work places, superior products, lower maintenance costs.
States with prevailing wage laws show up to 13-15% more value-added per worker, a factor which lowers overall construction costs and debunks the argument that prevailing wage projects cost more.
Prevailing Wages Support Quality Apprenticeship Training
The prevailing wage supports in-state contractors who are committed to training the workforce of tomorrow through well-run apprenticeship programs that attract women and minority workers.
Prevailing wage policies increase the probability a non-white will work in construction by 6%.
Eliminating the prevailing wage reduces apprenticeship and construction training opportunities by up to 40% and reduces minority apprenticeship opportunities by 54%.
Nationally, military veterans work in construction at substantially higher rates than non-veterans. In states with prevailing wage laws, veteran construction employment is even higher and poverty amongst veterans employed in the skilled trades decreases by as much as 31%.
Prevailing Wages Supports Local Hiring and the use of In-State Contractors.
Prior to the enactment of prevailing wage laws, government-funded projects encouraged a “race to the bottom” model which incentivized the use of low-skilled, low-wage workers and out-of-state contractors. The prevailing wage creates a level playing field for all contractors by removing “labor cost” from the equation and requiring contractors to bid based on their experience and efficiency and NOT on how low they can drive down wages.
When Michigan and Wisconsin considered weakening their prevailing wage laws, the research showed that the amount of construction work that would have leaked to neighboring states would have cost 9,700 and 6,700 jobs, respectively; $55M and $40M in tax revenue, respectively; and reduced each state’s economy by $1.5B and $1.1B, respectively.
Based on the 2012 Economic Census Data, states without prevailing wage laws export 2% of their total construction investments out of state, leading to job losses and substantial reductions in overall economic output. That means New York’s prevailing wage law prevented $1.74M from being exported to out-of-state contractors in 2012. Imagine what a stronger law could do.
Prevailing Wages Do Not Increase Costs.
Dozens of studies have been performed assessing the impact of prevailing wage rates on the overall cost of construction. One of the most recent studies (The Economic, Fiscal, and Social Impacts of State Prevailing Wage Law, Feb. 2016) has not only concluded that there is no statistically significant difference between prevailing wage and non-prevailing wage public construction projects, but also found that 75% of recent peer-reviewed studies agree with that conclusion. The study also explains why many NON-peer reviewed studies reach a different conclusion: their flawed methodologies fail to account for differences in labor productivity, material and fuel costs, contractor profit, and other construction efficiencies that change with wage rates.
Labor comprises just 23% of total construction costs. Therefore, the difference between prevailing wages and non-prevailing wages, whatever that percentage may be, only affects 23% of total project costs.
Importantly, wage policy affects more than overall labor costs. Seventy-five percent (75%) of peer-reviewed studies find that construction costs are not impacted by the prevailing wage. Why? Because workers on prevailing wage projects tend to be more skilled which means more capital equipment is utilized, productivity rises, and costs related to materials and fuel costs are reduced. Studies to the contrary rarely undergo academic peer review, generally rely on the erroneous belief that low skilled, low wage workers offer the same productivity as higher skilled workers, and presume that labor costs are the only component affected by wage policy.
A Constitutional Mandate
Labor of human beings is not a commodity nor an article of commerce and shall never be so considered or construed. No laborer, worker or mechanic, in the employ of a contractor or subcontractor engaged in the performance of any public work, shall be permitted to work more than eight hours in any day or more than five days in any week, except in cases of extraordinary emergency; nor shall he or she be paid less than the rate of wages prevailing in the same trade or occupation in the locality within the state where such public work is to be situated, erected or used.
Article I § 17
Section 220 of the Labor Law is intended to carry out this constitutional mandate. However, neither the constitution nor section 220 actually define “public work."
Factsheet: Does Prevailing Wage Increase Costs?
Factsheet: Prevailing Wages Build Strong Middle-Class Communities
Prevailing Wage Studies: