What is one of the biggest differences between public and private construction projects? When it comes to costs, the biggest difference is the prevailing wage. Labor advocates insist that utilizing the prevailing wage creates an even playing field for every contractor bidding on a public project, and it also prevents workers from getting exploited by unfairly low wages. But contractors insist that expanding the prevailing wage to other types of projects will make those projects so expensive, that they may never get done.
What Is Prevailing Wage?
The prevailing wage in any state or part of a state is based on the individual union wages for each labor category available. For example, if a project used prevailing wages in Buffalo, NY, then all of the electricians would get paid based on the union electrician rate, so would the carpenters, and so on.
In some parts of the country, the prevailing wage is considerably higher than in others. The wages for all labor categories for New York City in 2016 are higher across the board than the 2016 prevailing wages in a place like Madison, Wisconsin. That means that the labor costs for doing a project in New York City would be much higher than in Madison, Wisconsin.
Contractors argue that the cities with the higher prevailing wages would go broke trying to fund projects that are based on prevailing wages. Lawmakers insist that prevailing wage projects protect workers, and that is why prevailing wage laws are being expanded in certain states.
New York Looks To Change The Laws
In the past, the only projects that were subject to prevailing wage laws in the state of New York were projects funded by public money. Any project in the state that was funded by local, state, or federal funds had to pay its workers the prevailing wage. Contractors complained that the prevailing wage laws made projects unnecessarily expensive, but New York lawmakers strongly disagree.
The New York State Assembly wants to make it mandatory for contractors to use the prevailing wage laws on projects where the funding is coming from state, regional, or local industrial development agencies. This would include the projects that offer tax breaks at any level, and the projects that are funded by low-interest loans financed by the local, regional, or state governments.
Contractors Firing Back
Contractors in the state of New York, and out of state contractors that work in New York, immediately fired back that implementing the prevailing wage laws on those types of projects would price the projects out of the range of those agencies doing the funding. Industry representatives speaking on behalf of contractors pointed out that many industrial development agencies are under-funded, which means that the prevailing wage law changes would take several community improvement projects off the table.
The precedent set for contractors to fight the expansion of the prevailing wage laws comes from a case that occurred in Washington, D.C. where a contractor was building a privately funded project on public land. The local government insisted that the contractor should be fined for not using the prevailing wage on public lands, but the courts ruled that the prevailing wages did not apply because the project was privately funded.
The Perceived Benefits Of Changing Laws
By altering the prevailing wage laws in this way, the state of New York hopes to exert more control over projects that involve public funds and public lands. In the case from Washington, D.C., the contractor in question pointed out that using prevailing wages would have added $20 million to the cost of the project. Contractors argue that price increases like that will bring community development projects in smaller communities to a halt.
Each state has its own laws as they apply to prevailing wages. The only absolute rule in every state is that projects funded with federal money must be done using the prevailing wage scale. But if the state of New York has its way, then any development project that involves construction anywhere in the state could become a whole lot more expensive. Right now, the legislation is still being considered by the New York Legislature. If it is approved, it could change the way construction is carried out everywhere in New York State.