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The Problems With Prevailing Wage in New York State

Jeff Welcher
 


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Let me start with an important notice and fact - ‘prevailing wage’ is not prevailing in the way that most people think of it. Miriam-Webster's dictionary defines ‘prevail’ as:
To be frequent; predominant; continue in use.

Now for prevailing wage in New York State, the term prevailing just means the highest wage currently being paid. It is not the arithmetic mean, medium or mode. It is not a reasonable average or even an average of the highest-paid hourly rates. Typically these rates are determined by county, although there are some exceptions.

Rebecca A. Meinking, president of the Empire State (New York State) chapter of the Associated Builders and Contractors explains “Because prevailing-wage laws require payment of wages higher than those that actually prevail; the majority of local contractors who employ local workers, but who pay those workers a wage that is ‘market-driven’ as opposed to ‘union-driven, ’ will be reluctant to bid on IDA [Industrial Development Agency] construction projects. That reduced competition will result in higher costs - plain and simple. " This quote was from Ms. Meinking's article in the Opinion section of the Rochester Business Journal, published May 30, 2008. It was in response to James Bertolone and Frank Wirt, authors of a labor article published in the same journal on May 16, 2008.

For example: four plumbers are being surveyed for prevailing wage rates in Nassau county. These workers make $75, $80, $85 and $65 per hour during the time being studied. In this case, the prevailing wage is $85. This means that once the New York State Department of Labor (often abbreviated NYSDOL) sets the prevailing wage, that all non-union contractors must pay $85 per hour and not a penny less.

So wait, this means that companies can't pay what they want to? Yes and no - company's can pay a rate they determine to be appropriate. Using the case of plumbers again: John Doe's plumbing company pays $50 an hour. However, and this is a big however - John Doe's company must pay their $50 base rate AND a $25 fringe supplement, per hour, on public work.

Examples of public works project include: roadway, traffic signals, schools, libraries etc. Essentially anything that is going to be used by the public, and is being paid for in part or fully by public dollars. In this example, John Doe's plumbing only pays their own rate of $50 on private jobs that do not require that prevailing wage be payed.

Hard to make sense of all this - welcome to prevailing wage laws and regulations in New York State!

Let's take a closer look. Using John Doe's plumbing again - why would they take public work? Well chances are they do, but they're not happy about it. They likely go out of their way to do as much private work as possible, so that they can pay their rates and not ones mandated by New York State.

So why is this a problem? Hard workers should get paid well, and contractors and laborers work hard right? Well of course they do! As I type this article, hundreds of men and women are hard at work on a major local highway renovation here in my city. It is a five-to-six month job, and every day I see their hard work and progress. In no way to I want to disrespect the hard work these workers and workers like them do day-in and day-out.

This being said - this is a definite problem, and here's why. There are two major types of contractors, union and non-union. Prevailing wage only applies to non-union contractors. Therefore, when these two very separate groups bid on the same project - their bids are sometimes drastically different. Union contractors can pay their workers whatever they want in order to submit a low bid and get a job. On the other hand, non-union contractors must always be cognizant of the prevailing wage rates in the counties they work in, and keep these in the front of their minds as they calculate their bids. More often than not, union contractors win out with significantly lower bids.

Compounding this problem, public works projects are often the most likely to go with the lowest bid, even if it means sacrificing quality. If a school were quoted $1.7M from a union contractor for a new parking lot, and $2.0M from a non-union contractor, most schools would be very hard-pressed to justify spending an extra $300,000 on the same job.

So how did this happen? Until 1931, union contractors were at a major disadvantage to their thriving non-union counterparts. The Davis-Bacon Act of 1931 was put into place by the federal government to level the playing field. During the depression, this made sense. Now that we are 77 years and counting from the implementation of the law, the table is so severely slanted in the direction of union contractors, one wonders how such a regulation has gone so long without any major amendments.

It should be noted that Davis-Bacon has been temporarily suspended on a number of occasions, most recently in 1992 following Hurricane Andrew and in 2005, following Hurricane Katrina. These suspensions during crucial recovery efforts add to the suspicion of the law's effectiveness.
Potential solutions? Davis-Bacon needs to be re-examined and overhauled to reflect the economy of this century. If it is suspended during times of extreme need, why does it need to overly-tilt the business table in the favor of unions during times of economic calm? Prevailing wage regulations put non-union contractors at a disadvantage so severe that they struggle to keep their businesses alive. Something must change or economic development will come to a halt in New York State.

Special note: this article in no way paints a perfectly clear picture of prevailing wage laws and regulations in New York State. This is designed to serve as a guide and summary, and should be used for reference purposes only.

For the latest up-to-date information on Prevailing Wage in New York State, and issues relating to it, please visit http://labor.state.ny.us .

Jeff Welcher is an employee benefits consultant at CompPayPlus, located in Rochester, NY and serving all 50 states. He is a Master's graduate of the Annenberg School of Communication (USC) and is an avid golfer and mountain biker.

CompPayPlus can be found at http://comppayplus.com

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