The concept of paying a prevailing wage dates back more than 70 years to passage by Congress of the Davis Bacon Act. This 1931 Act made prevailing wage federal policy in the construction industry, where the Act’s proponents claimed that project bids accepted based on price had created a downward push on workers’ wages historically. Soon after Congress passed the federal law which mandated payment of prevailing wage to all construction employees working on federal government projects, states began passing their own legislation designed to apply the same requirement to state and local government construction projects. Today, 32 states (including New York) have such laws. The state laws vary from one state to another. In theory, the prevailing wage is supposed to be the wage that is either paid to the majority of workers in a specified occupation, or is the average wage of all of an occupation’s workers within a specified locale. In New York, however, the prevailing wage is essentially the regional union wage for a given occupation. And it not only mandates a certain hourly wage, but also mandates an hourly benefit payment based on the union benefit costs and practices.
Now, I am an open shop electrical contractor in the Rochester, NY metropolitan area. I have an average of 50-75 field electricians who perform commercial, industrial and institutional electrical work in the Upstate, New York region. A small percentage of that work is work that is subject to NYS prevailing wage requirements. My company pays wages based on skill level, efficiency, and productivity. The higher one’s skills and abilities, the higher hourly wage one earns. This merit pay concept is really the foundation of the American dream – work hard and you will succeed. I have electricians of varying skill and ability levels, and I comprise my workforce on any given project with a combination of the varying skill and ability levels that my employees possess. So I have a number of different hourly wages that I pay to the electricians on any given project. The lower skilled, less efficient and less productive electricians are paid a lower hourly wage than those who are highly skilled, highly efficient and highly productive. But if I work on a prevailing wage project, that same combination of electricians ALL have to be paid the same rate – the union electrician journeymen’s rate, which in my case currently is $30.35/hour if the work I am performing is in Monroe County. I’m forced to pay one wage, and it’s an inflated wage based on a union collective bargaining agreement that assumes the average worker works approximately 1500 hours annually (my electricians by and large work close to 2000 hours annually).
Definitely increases the labor costs on the job, a cost increase that is paid by the taxpayers. But that’s not the worst of it. In addition to this inflated hourly wage that is required, there is a ridiculously inflated hourly benefit payment that is required for every worker for every hour worked. Again, in my case, if I am doing prevailing wage work in Monroe County, the hourly benefit payment requirement for my electricians is $19.44/hour. That calculates out to about $38,000 in benefits annually. Now I provide health insurance, dental insurance, vision insurance, a 401(k) style retirement plan, an employee assistance program, paid vacation and holidays, etc. But there is no way that providing these benefits to my employees costs $38,000 per year. NO WAY. It would probably be a stretch to say that it costs me even ½ of that to provide an excellent benefit package to my employees. But on prevailing wage jobs, I’m forced to bill the government for wages and benefits in excess of what I would normally require because of prevailing wage. And who pays the government’s bills? The taxpayers do. And NYS prevailing wage is one of the biggest fleecing of taxpayers ever, and it needs to stop. NOW. Prevailing wage should NOT default to the union wage in NY – it should reflect the average wage of all of an occupation’s workers within a specified locale. And this information is ALREADY available through the NYS Department of Labor’s unemployment prevailing wage data, which is updated annually. So it would require no additional resources at NYSDOL to manage the collection of this data annually. And for benefits, the USDOL Bureau of Labor Statistics released their findings back in December 2011 that on average, employee benefit costs to employers are approximately 35% of wage/salary costs. So prevailing wages could feasibly become whatever the UI prevailing wage for the construction occupations are in the various regions of the State, with an additional requirement to pay 35% of that wage either as additional wage or into benefit programs. Problem solved. Taxpayers win again!