Each year, school districts, local governments and the state government spend hundreds of millions of dollars (and sometimes billions) on construction projects. Part of the cost involves paying “prevailing wages” for labor, in accordance with a state law intended to prevent some contractors from gaining a competitive advantage by paying workers less on government projects. But there is a problem. The “prevailing” wages taxpayers pay are far more generous than what often prevails in the marketplace.
According to data from the New York State Department of Labor (DOL), the median wages for various trades paid in the different regions of the state are substantially lower than prevailing hourly wage requirements based on collective bargaining agreements. For instance, On Long Island, electricians earn a median wage of $61,190, or $29.42 per hour, assuming a 40-hour work week. But the prevailing wage every school district and local government pays is about $43.34 per hour, or the equivalent of $90,160 per year. Carpenters in western New York earn a median $39,520, while the annualized prevailing wage is $58,156. Plumbers in the Mohawk Valley earn a median $56,030, while the prevailing wage is an annualized $60,112.
Benefits are also better on prevailing wage jobs. In the private sector, benefits are generally 30 to 35 percent of pay. But our Long Island electrician working on a school or government project would receive benefits valued at $62,420, or 69 percent of wages. For the western New York carpenter and the Mohawk Valley plumber, the comparable figures are 80 percent and 65 percent, respectively.
One possibility for this circumstance is that the data used to set prevailing wages are inflated. Prevailing wages are set each year by DOL based upon collective bargaining agreements for particular trades in various jurisdictions of the state. The collective bargaining rate – essentially the union rate – is supposed to be used when 30 percent or more of the workers in such trade are represented by a union which has negotiated a collective agreement. DOL used to conduct wage surveys to ascertain whether trade unions represented at least 30 percent of employees in a given area in a given trade and to ascertain what the wage rates were, but no longer. No one in state government verifies whether prevailing wage rates accurately reflect true market conditions, which is particularly worrisome since these rates are paid by taxpayers.
Given the financial stress which governments at all levels are experiencing in New York, we should question some long-standing assumptions, including how prevailing wage rates are determined. The Let NY Work initiative, launched yesterday in Albany by a coalition of governments and private sector business interests, recommends revamping the way the prevailing wage is determined to more accurately reflect true market conditions. The NYSDOL already has wage information, by trade and by region within the state, that could easily become the basis for prevailing wage determinations going forward. The cost savings that this prevailing wage reform recommendation will generate will go a long way to helping state and local governments live within the 2% tax cap that state law now mandates.