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The Truth About Prevailing Wage

1/6/2014

 

            THE TRUTH ABOUT PREVAILING WAGE

 

COMMON SENSE ARGUMENT FOR PREVAILING WAGE

 

The Pennsylvania Prevailing Wage Act has been a persistent topic of discussion among a small group of people of little regard for the existence of legitimate Pennsylvania Businesses, for the well being of our Communities, or for the intelligence and rights of Pennsylvania taxpayers for some time. Those who attack the law are either ignorant of its purpose…to protect Pennsylvania businesses from unfair competition paid for with taxpayer dollars…or have a hidden agenda to use public funds to undermine Pennsylvania businesses, communities and workers. The Prevailing Wage Law is simply a minimum wage law applicable to taxpayer financed public construction projects that assures that local businesses that pay local market based wages and benefits to their skilled construction workers will not be victims of out of state contractors or unscrupulous local businesses that refuse to play by the rules but still think they have a right to get money from Pennsylvania taxpayers.

 

Typically, the primary argument against the current Prevailing Wage Act is that it drives up the cost of construction. That is simply not true; many have announced that eliminating local, market based, prevailing wages will reduce the total cost of a construction project by anywhere from 10% to 30%. So let’s start there. Construction Labor costs, according to Construction Industry experts, are generally 19% to 24% of the total cost of a construction project.  Looking at actual numbers can show how preposterous the claims of 30% savings can be.

 

Let’s look at a successful bid of $1,000,000 for a new construction project. If we split the difference of the usual labor cost portion of total construction project costs and use 22%, $220,000 would be the labor portion of the total project. Obviously any savings over 22% would be impossible unless the workers not only worked for free…with no pay or benefits… but also contributed to cost of the construction materials for the project.

  

To look deeper at the issue, let’s assume that we actually can save 10% to 30% on labor. The ten percent claim would result in a savings of $22,000 or 2.2% of the total job cost, while thirty percent of $220,000 equals $66,000 or 6.6% savings at the high end of the claim. Can the 2.2% - 6.6% savings be realized?

 

Contractors bid on projects based on wages, cost of materials, and the estimated number of employees to complete the job on schedule, etc.  For our purposes, consider a number of contractors consisting of both union and non-union bidding on a private job.

 

Market wages paid by agreements between unions and employers are a published figure that is easily learned, allowing the non-union employer the advantage of adjusting the wage portion of its bid accordingly to secure an advantage in the bidding process.

 

This does not guarantee that the diminished wage portion of that bid will be passed on to workers on the job; it could just as easily be kept as profit for the contractor. In fact, not even one of the legislative proposals to totally or partially repeal the Prevailing Wage Act, requires, or even mentions the idea, of passing the results of local wage cuts on to the taxpayers who are footing the bill!

 

Without Prevailing Wage laws, contractors are under no constraint to pay their workers a determined wage or benefit.

How much of that 2.2% - 6.6% savings will be passed on to the tax-payer?

 

The answer is NONE!

 

And how much will be kept as additional profit by the contractor?    All of the so called “savings”! … in other words, the wages are cut for the people doing the work but no savings get passed along to the people paying the bill…how smart is that?

 

 

Additionally, an alarming result of prevailing wage repeal in a few other states was the devastating affect it had on worker training.

 

A study done by an Economist from the University of Utah showed a 40% drop off in training and also noted that occupational injuries rose by 15% after the repeal of the Utah Prevailing Wage Law.

 

  The value of training through joint apprenticeship programs, at virtually no cost to the taxpayer, is remarkable. These apprenticeship programs are under the joint administration of the local craft union and the contractor group the skilled craft people work for.  They are intensive training sessions that run 4 to 5 years in duration with both on the job and classroom training.

 

 In addition to learning the skills necessary to perform at the highest level possible, safety is also a priority in the teachings.

 

 Currently there are 113 building trades’ local unions in Pennsylvania, each with apprenticeship programs, training over 10,000 apprentices representing 75% of all registered apprentices in the state.

 

The programs, again at essentially no cost to the taxpayer, provide access to careers for young men and women enabling them raise families, buy a home, and become a valuable tax-paying asset to their communities.

 

Through collective bargaining with their contractors they will earn local market based benefits, including additional training, health care and pensions.

 

 Their skills will allow these Pennsylvanians to achieve middle class incomes and dreams.

 

Referring back to the Utah Study, when the prevailing minimum wage requirements were repealed in states like Utah and Louisiana, an unprecedented number of the skilled construction workforce left the state in search of wages commensurate with their training and experience.

 

If that’s a lead, its one that shouldn’t be followed here in Pennsylvania. It is a recipe for a race to the bottom for our state and its communities.

 

At best, the claimed cost savings (which are, at best, debatable) associated with repealing the Pennsylvania Prevailing Wage Act are minimal, however, enforcing the current law would ensure maintaining continued quality in the skilled workforce Pennsylvania currently enjoys due to the competitive, local market based wages and rigorous training programs.

 

Moreover, there are over 3000 contractors in our state, who are party to agreements to pay market based wages in their local areas, with access to over 100,000 tax-paying Pennsylvania trained, skilled and experienced craft people prepared to safely complete any construction project in any of our communities.

 

 As stated each has access to the latest training available for both apprentices and journey people. To further demonstrate the point that prevailing minimum wage protection ensures the highest skilled workforce possible one need only  look at testimony of Mr. Nicholas Rogers, a member of the Southeast PA chapter of the Associated Builders and Contractors and part owner of Rogers Mechanical. Over a decade ago on February 20, 2002 Mr. Rogers made a statement before the Pennsylvania House of Representatives Labor Committee.

In that statement he asserted, [I]n order to make profit on Prevailing Wage projects I have to use my best workers”.  This comment, by a “non-union” exemplifies the purpose and need for prevailing wage.

 

In conclusion, simple common sense requires that when primary claims of savings are statistically impossible, the rest of the argument is suspect as well.

 

Prevailing Wage encourages fair competition in taxpayer funded projects here in Pennsylvania. It prevents fly-by-night contractors from underbidding legitimate Pennsylvania businesses simply by slashing wages and attracting the very predictable result. It allows all contractors to operate on a level playing field; it prevents unscrupulous contractors from underbidding a project, importing unskilled and/or illegal workers and pocketing our tax dollars that are supposed to pay for these projects.

 

All of this information supports the reasons the original Prevailing Wage Act that was adopted by the Pennsylvania House of Representatives by an overwhelming 183 – 4 vote in 1961 and which has had bipartisan support ever since because it is GOOD FOR PENNSYLVANIA AND GOOD FOR OUR TAXPAYERS.

 

REMEMBER, IF SOMETHING SEEMS TOO GOOD TO BE TRUE, IT MOST LIKELY IS.

IF IT AIN’T BROKE DON’T FIX IT!

 


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Thank you for visiting the web page of the Pennsylvania State Building & Construction Trades Council. The unionized construction industry is very unique, and we are proud to be the organization that leads the way when it comes to standing up for what is best for our members...and what is best for our communities.

Throughout our extremely large and diverse state, it is the members of the Pennsylvania Building Trades that create and maintain the infrastructure in the Commercial and Industrial Industries, which includes office buildings, hospitals, universities, schools, libraries, stadiums, bridges and highways, warehouses, power generation facilities, refineries and chemical plants that make our state such a wonderful place to live and do business. It is these same members of the Building Trades that tirelessly give back to their communities by volunteering their time to organizations that make life better for those less fortunate. We go beyond the call of duty to raise the standard of living for people in our communities.

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