You get what you pay for: Undercutting prevailing wages is a recipe for economic decline

May 15, 2012 | Aaron Keating

Crews assemble the steel cages that will become part of the underground supports for the SR 99 South End Viaduct Replacement project in Seattle. Photo: Washington DOT (Flickr Creative Commons)

If you think our elected representatives should be working to undercut – instead of boost – people’s wages, this news won’t make you happy. But there’s good news for everyone else: a three-pronged effort to diminish Washington’s prevailing wage law met a well-deserved defeat during the 2012 legislative session.

First enacted in 1945, Washington’s prevailing wage law ensures people working on public projects receive wages, benefits, and overtime that are typical for their occupation. This year, Senators King, Schoesler, Hewitt, and Holmquist-Newbry jointly sponsored a trio of bills designed to weaken the state’s standard:

  • SB 6419 replaced the current prevailing wage definition – wages, benefits and overtime earned by the majority of urban-area workers in a particular trade/occupation – with a lower standard: the county-wide average of all workers in that trade/occupation.
  • SB 6420 excluded workers who supply materials and equipment from Washington’s prevailing wage law.
  • SB 6422 limited the prevailing wage law’s coverage to only those workers employed in construction activities.

None of the three bills made it out of the legislative committee into which they were introduced – and it’s a good thing. Diminishing people’s paychecks is no recipe for getting out of a recession, especially given that there’s no strong evidence prevailing wage laws have any impact on construction costs. Take schools, for example:

  • Pennsylvania school construction data shows no across-the-board decline in costs after prevailing wage laws were weakened there.
  • A study of 15 Great Plains states showed the average cost per square foot of building new schools did not differ significantly between states that had prevailing wage laws and states that did not.
  • A comparison of school construction costs between prevailing wage and non-prevailing wage states in the Mountain West and Southwest found that average costs per square foot were actually lower in states with prevailing wage laws.
  •  A study of school construction costs in Maryland and other mid-Atlantic states found that prevailing wage laws have no measurable impact on costs.

There’s also evidence that weakening prevailing wage laws actually increases costs in the short-term and long-run. Declining worker productivity means more hours are required to get a particular job done; as morale drops, more time has to be spent fixing mistakes; as experienced and skilled workers move on to better-paying projects, fewer workers commit to apprenticeships, leading to long-term labor shortages.

Getting the best value for our public dollar requires thinking beyond penny-pinching policies like weakening our prevailing wage standards. As the Keystone Research Center notes:

Real savings in public construction costs are more likely to come from investments in worker training, which can make workers more productive, thereby lowering costs without cutting wages.

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Posted in State Economy

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