New York’s prevailing wage law

A cost-benefit analysis

(A working paper from the Economic Policy Institute)

By Russell Ormiston, Dale Belman, and Matt Hinkel
November 1, 2017

The cost of state prevailing wage laws has been a considerable focus of independent, academic economists over the last 15 years. In study after study, the results demonstrate a clear consensus: state prevailing wage laws have not been shown to increase taxpayer costs on the biggest components of state construction budgets (roads and schools). If this seems counterintuitive, consider that high-wage contractors employ the most skilled and most productive workers and use the industry’s most advanced technology and equipment; this allows them to place bids on public construction projects that are competitive with-if not better than-those of low-wage, low-skill contractors. Essentially, state lawmakers “get what they pay for” when it comes to hiring contractors and workers to build public construction projects.

There is another fundamental problem with the current narrative on state prevailing wage laws: it entirely ignores the many benefits that the law provides a state’s residents and communities. In a time when economic opportunities for blue-collar workers are slipping away-devastating families and communities-prevailing wage laws are one of the few effective policies available to state lawmakers that increase the standard of living for these workers, incentivize employers to provide opportunities for training and skill development, and offer a clear pathway to the middle class for non-college educated state residents. Prevailing wage laws also advantage in-state and law-abiding contractors, reduce illegal employment practices, and improve workplace safety for a state’s residents. Any public discussion about state prevailing wage laws that ignores the benefits of the policy does an incredible disservice to a state’s workers, families, and communities.

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(PDF Copy of Report)

Here’s why California developers must pay construction workers a fair wage

Special to The Bee
OCTOBER 27, 2017 5:00 AM

Eighty five percent of the costs associated with housing construction in California are unrelated to the wages or benefits paid to the workers who actually build it.

And since 1990, those wages, adjusted for inflation, have actually decreased by 25 percent and been redistributed into profit margins for developers, which are growing 50 percent faster than the cost of materials or labor.

Developers got most of what they wanted in housing reform legislation that Gov. Jerry Brown signed into law this month. And yet the building industry continues to complain about wages that are going to be paid to construction workers on certain projects.

The builders claim that they will need to raise prices to grow their already bulging bottom lines if they have to pay their workers enough to live. But there’s no real evidence to support this assertion.

In reality, the elimination of red tape on new housing construction likely will save most developers far more than any modest increase in their workers’ wages.

Peer-reviewed research on prevailing wages shows no impact on total project costs, because these standards promote skills training and quality workmanship that increase productivity and reduce spending on fuel and materials. And because they are market rates that reflect local cost of living, they save taxpayers the cost of subsidizing below market wages with welfare expenditures.

These aren’t abstract academic theories.

In 2015, the state of Indiana repealed its prevailing wage law. Earlier this year, the Indiana Assembly assistant Republican floor leader was asked about the effect on project costs. His response: “It hasn’t saved us a penny.”

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Prevailing wage called “imperative” to housing bills

Oct. 10, 2017

State Building and Construction Trades Council President Robbie Hunter established a context in support of the prevailing wage in a Sacramento Bee story this week when he discussed how decent pay buys a highly skilled and trained work force that in the end cuts down on construction costs.

“Build it once, build it right,” the newspaper quoted Hunter as saying.

The Bee’s Oct. 8 story focused on the prevailing wage component included in five of the bills that were part of a housing package that was signed into law on Sept. 29 by Gov. Jerry Brown.

Three of the bills included an expedited approval process for contractors to get their projects built, including one piece of legislation, Senate Bill 35, which bypasses delays imposed by city councils and by a redundant environmental review process.

“Therefore,” Hunter said in a later statement, “it was imperative to have prevailing wage rates and a skilled workforce to assure that workers are paid a fair wage.”

As Hunter said in the video that accompanies the story, “If there is not a fair wage paid to the workers who are building a project, the very workers will be the ones who need the affordable housing.”

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Understanding Wage Rates Under California’s Prevailing Wage Law

Richard E. Donahoo

California’s Prevailing Wage Law requires contractors to pay specific wage rates on public works projects. The rates are published by the State’s Department of Industrial Relations (“DIR”). The published rates include many different prevailing wage rates, which are based on the geographic location and the type of work that is performed. The rates are organized and published by the DIR in General Prevailing Wage Determinations, which set forth the rates for worker classifications (e.g., Laborer, Carpenter, Plumber, Operator). The specific rates applicable for each craft, classification, or type of work, and for each geographic locality throughout the state, can be located on the DIR website at Understanding how to read a General Determination is important to understanding the required rate.

Prevailing Wage Determinations

California Labor Code (section 1774) states that workers must be paid not less than the “specified prevailing rates of wages” to all workmen employed in the execution of the contract. These specific rates are found in the General Determinations, which correspond to the type of work actually performed by individual workers. As explained in the State’s Public Works Manual,

“A worker’s title or status with the employer is not determinative of an individual’s coverage by the prevailing wage laws. What is determinative is whether the duties performed by the individual on a public works project constitute covered work. An individual who performs skilled or unskilled labor on a public works project is entitled to be paid the applicable prevailing wage rate for the time the work is performed, regardless of whether the individual holds a particular status such as partner, owner, owner-operator, independent contractor or sole proprietor, or holds a particular title with the employer such as president, vice-president, superintendent or foreman. For example, a “working” foreman or a “working” superintendent – one who performs labor on the project in connection with supervisorial responsibilities – is entitled to compensation at not less than the prevailing rate for the type of work performed.”

The Basic Hourly Rate vs Total Rate

General Determinations include both a Basic Hourly Rate and the Total Hourly Rate for each location and classification. Employers are required by California law to pay employees the Basic Hourly Rate as the minimum hourly wage for all hours worked. The Total Hourly Rate includes the Basic Hourly Rate and additional compensation for “employer payments” which are typically fringe benefits such as health insurance, vacation, pension and other “fringe benefits.” Employers can choose to pay fringe benefits directly to employees as part of their wages or can obtain an offset for the employer’s “actual cost” of the benefit provided to the employee that was paid into a bona fide health, pension, vacation, or fringe benefit plan. Either way, the total compensation paid by the employer to the employee must match the Total Hourly Wage set by the Director in the General Determination.

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Builders, construction workers settle fight over California wage theft bill (CA)

SEPTEMBER 14, 2017 9:52 AM

A contentious proposal that would put California builders on the hook for wage theft violations by their subcontractors has advanced to Gov. Jerry Brown after a last-minute agreement between the author and opponents.

The Assembly on Wednesday sent to the governor’s desk Assembly Bill 1701, which would allow construction workers who have not been paid for a job to seek their back wages and benefits, with interest, from the general contractor, even if they did not work directly for that company on the project.

Both the building industry and construction trade unions lobbied heavily on the measure, by Assemblyman Tony Thurmond, D-Richmond, in the final weeks of session, plastering websites with digital advertisements, passing out fliers on the sidewalk outside the Capitol and setting up an electronic billboard across the street.

Unions argued that AB 1701 gives workers a legal remedy when subcontractors skip town or file for bankruptcy before paying employees, while the building industry warned that it could drive up the cost of construction and worsen California’s housing crisis by potentially forcing them to pay twice for labor.

Yet the measure received overwhelming support Wednesday when it came up for a vote in the Assembly, passing 52-13. Just before that, Thurmond said, he submitted a letter to the Legislature stating his intent to carry a follow-up bill. It will remove a section of AB 1701 that builders worried could be used to hold them liable for further monetary damages.

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Prevailing wage is good for workers (DE)

Letters to the Editor
Published 9:00 a.m. ET Sept. 12, 2017
Updated 10:26 a.m. ET Sept. 12, 2017

There he goes again. In the Monday News Journal story “Prevailing wage law ignites Republican suspicion,” Sen. Greg Lavelle continues to offer alternative facts about the state’s prevailing wage law.

The truth is prevailing wage is determined by wage surveys of construction work done in Delaware, reflecting a market rate for construction workers. It includes a worker’s total compensation – take home pay, cash value of health care benefits, and retirement benefits.

The prevailing wage applies to union and non-union construction workers and it levels the playing field for Delaware workers by protecting their wages from unscrupulous contractors and out of state workers.

Plus, multiple studies and analyses of other states, like Wisconsin and Indiana, that have eliminated prevailing wage have shown that the savings promised through the deceitful and anti-worker rhetoric never materialized.

Mike Hackendorn
Vice President, Delaware Building Trades Council

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Democratic leaders: Prevailing wage is good for Delaware (DE)

Senators David McBride, Margaret Rose Henry and Nicole Poore
Published 2:07 p.m. ET July 21, 2017
Updated 2:33 p.m. ET July 21, 2017

The 2017 budget debate is behind us, and plenty of page space in this publication and others has been committed to its finer details. We’re perplexed, though, by how much of the Republican dialogue continues to be dominated by an issue completely peripheral to the budget: the prevailing wage paid to blue-collar workers on public works projects.

Partisan misinformation has clouded the truth surrounding both the budget and the prevailing wage. We believe that the public deserves a discussion that cuts through political spin and cocktail napkin math and offers a straightforward inventory of the facts.

Prevailing wage laws ensure fairness in government contracts by basing laborers’ total compensation on a survey of similar workers in their area, just as anyone would expect wages commensurate with their skills, occupation, and cost of living.

You may have heard some of the following myths:

Myth: The prevailing wage is a budget issue that affects the $354 million deficit closed by the General Assembly earlier this month.

Fact: Public works projects are funded almost entirely by the capital budget, or “bond bill,” a completely separate balance sheet. Our operating deficit was caused by a unique combination of factors: growing public school enrollment, special education costs, national health care prices, and a tax portfolio that works more like a scratch-off ticket than a speedometer for our economy. Our colleagues across the aisle who sit on the budget-writing Joint Finance Committee are perfectly aware of that fact.

Myth: Reducing or repealing the prevailing wage would lower public construction costs by as much as 24 percent.

Fact: Multiple studies and real-world examples show that this is simply untrue. States that slash public works wages rarely realize the cost savings that are promised in campaign years, while middle class wages tumble and the economy suffers. That actually does hurt the state’s bottom line.

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Michigan petitioners stretch truth for signatures (MI)

Jonathan Oosting
Published 11:32 p.m. ET Aug. 2, 2017 Updated 7:28 a.m. ET Aug. 3, 2017

Lansing – Summer is petition season in Michigan, where paid circulators are taking advantage of warm weather and public events to collect signatures for at least three statewide initiatives – and sometimes stretching the truth in their sales pitch to voters.

A circulator working a park concert last month in Lansing approached a Detroit News reporter and requested signatures for two separate petitions, including one she said was “for the teachers and construction workers to help protect their wages, benefits and pensions,” a claim she repeated twice.

The initiative actually seeks to repeal the state’s prevailing wage law, which guarantees union-level wages and benefits for workers on some government-funded construction projects. It has no direct connection to teacher compensation, but supporters contend it would reduce school construction costs. Critics argue it would drive down worker pay on construction projects.

His bill would make it a misdemeanor crime for a paid or volunteer circulator to “knowingly and willfully circulate, publish, or exhibit a false statement or misrepresentation concerning the contents, purport or effect” of a statewide petition. Violators could face up to 93 days in jail and/or a fine of up to $500.

“I believe that the petition process is a fundamental part of our democracy here in Michigan, but you’re stealing that from somebody when you lie to them, when people think they’re signing one thing and they’re actually signing something else,” Hertel said.

Similar anti-lying legislation was introduced in the House by Rep. Jeremy Moss, D-Southfield, but the proposals have not yet been taken up by Republican majorities in either chamber.

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Leroy Miller: Repealing prevailing wage will hurt vets (WI)

Leroy Miller

I love my country. I’ve fought for my country. My brothers and sisters have died for this country. I want to continue to serve my country.

I am a heavy-equipment operator, happily and dutifully building new infrastructure for Wisconsin communities.

My concern is, and has been, what state legislators are proposing in a full repeal of the state’s longstanding prevailing wage law. This is the law that protects Wisconsin workers from low-wage-paying, out-of-state contractors who will be free to pay their workers substandard wages in the interest of undercutting Wisconsin contractors and effectively stealing jobs here. And guess what? It’s working.

Last legislative session our elected leaders in Madison partially repealed prevailing wage for municipal-funded projects, which went into effect this January. Since then, a state review of projects to-date found there has been a more than 53 percent increase in out-of-state contractors securing Wisconsin work. Those are Wisconsin jobs being lost, Wisconsin tax dollars leaving the state and hard-working Wisconsin families being hurt. You don’t have to be a political wonk to understand how and who this hurts – Wisconsin workers.

Why as a proud veteran am I involved? Many of us veterans are drawn especially to two lines of work after our service – law enforcement and construction. I’ve chosen construction because I want to continue to serve my country in a meaningful way but lacked the necessary skills to make the transition. Thanks to many of the construction trades in Wisconsin they have specifically designed apprenticeship programs for veterans to provide them the necessary training and skills to transition into the construction industry.

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Prevailing wage, project labor agreements protect living standards for construction workers

July 6, 2017 at 12:01 am

In an era of political hyperventilation, it might be a good idea for some critics to take a deep breath before they launch into their attacks on the prevailing wage laws and project labor agreements that protect the living standards of construction workers in California and across the nation.

From Washington, D.C., to Los Angeles, anti-union writers in recent weeks have incorrectly branded the 1931 Davis-Bacon Act that wrote the prevailing wage into the law on taxpayer-funded construction projects as born of racism and a rip-off of public funds. The same critics also have falsely characterized project labor agreements as costly to taxpayers and unfair to nonunion construction companies.

Now, for the facts.

Two Republican congressmen, Sen. James Davis of Pennsylvania and U.S. Rep. Roger Bacon of New York, sponsored their legislation 86 years ago to establish a minimum wage on taxpayer-funded construction projects, based on local measures of central tendency in any of the covered construction trades.

The idea behind the prevailing wage is to keep unscrupulous operators from low-bidding the legitimate competition to the detriment of the local workforce. The effect has been to allow blue-collar workers – 400,000 of whom are represented by the State Building and Construction Trades Council of California – to maintain their place in the American middle class.

Of the false charges that have been lodged of late about Davis-Bacon, perhaps the most repugnant is the smear that recirculates every so often that the act originated as an outgrowth of racism. The critics troll through the historic record to quote some congressmen in the debate over Davis-Bacon who supported the law based on their own warped view that it was designed to protect higher-paid white workers in the northeast represented by the authors of the law from “cheap colored labor” that would be imported to their districts from the South. The critics fail, however, to report Congressman Bacon’s reply that imported workers came in white skin as well as black.

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