Hike Public Project Labor Costs 22 Percent
53 Number 2658
The use of federally mandated prevailing wages increased the
cost of labor on public construction projects by 22 percent and overall
construction costs by 9.91 percent, according to a study released May 7 by the
Beacon Hill Institute for Public Policy Research at
According to the study of 117 projects, federal, state and local governments spend about $300 billion annually on construction projects. Because prevailing wage laws establish a wage floor, they raise the cost to taxpayers construction cost by an additional $8.6 billion a year more for public construction projects
G. Tuerck, executive director of the Boston-based
Arguing that the purpose of prevailing wage law was to deny employment opportunities to workers from outside the immediate area, he said that "the best solution would be to repeal [the] Davis-Bacon [Act] and to render unnecessary the whole problem of divining what the prevailing wage is. Next best would be to shut down the Labor Department's Wage and Hour Division and take the simple step of getting the measurement of the prevailing wage right."
The Wage and Hour Division calculates the prevailing wage under Davis-Bacon, the study said, while the Bureau of Labor Statistics has the parallel job of computing "impartial, timely, and accurate data relevant to the needs of our users and to the social and economic conditions of our Nation, its workers, and their families."
Prior to calculating the prevailing wage rate, the survey said, "the WHD conducts voluntary survey of the wages and fringe benefits paid to workers in specified job classifications for comparable construction projects in specific geographical areas."
An examination of the WHD's methodology, according to the study, showed:
· untimely wage reporting,
· poor survey design,
· strong incentives and the opportunity for unions to dominate the process of reporting wages, and
· ill-conceived calculation methods.
The study argued that BLS uses a larger sample from the Occupational Employment Survey. "The WHD could realize substantial cost savings by utilizing the raw wage data collected by BLS, eliminating the need to conduct their own survey. Relying on the BLS wage data would solve numerous issues mentioned earlier in the report. It would address concerns relating to the timing of the surveys, to the population accounted for in the sample of wage data, to the geographic areas surveyed and to inconsistent job categories across counties."
Critics Challenge Findings
Labor unions and union contractors disputed both the study's findings.
Jacob Hay, spokesman for the Laborers' International Union told BNA on Feb. 8, "Arguments against prevailing wage are rooted in the overly simplistic view that equates higher wages with higher construction costs. Higher wages are usually offset by greater productivity and other economic benefits such as worker training, safety and local economic development."
Raymond J. Poupore, executive vice president of the National Construction Alliance, said NCA recently commissioned a study by the Construction Labor Research Council that proves, by utilizing data supplied by the Federal Highway Administration, that wages paid to a construction worker are a poor indicator of the total cost of building a highway. He said "the [CLRC] report states that higher wage workers can build highways with no impact upon total cost because of their superior skills.
Stan Kolbe, director of legislation for the Sheet Metal and Air Conditioning Contractors' National Association, called the report flawed and said that it was based upon the assumption that all public projects have a 50 percent labor cost component, which he said is not accurate in buildings and other facilities. Kolbe said, "the report makes the discredited claim that support for Davis Bacon was or is based upon racial discrimination-then admits within the report that the claim was found meritless in federal court.
By Sheila R. Cherry
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