Backlash Brewing Against Prevailing Wage Expansion

Published July 1, 2008

As the share of the construction workforce that is unionized continues to decline, state laws requiring payment of prevailing wages on public works and other government-funded construction projects are becoming more controversial.

At the same time, organized labor is pressing to expand coverage of prevailing wage laws in states where unions wield political power.

The resulting conflicts are affecting a variety of government objectives. Evidence of these stresses is anecdotal but widespread.

Water Project Goes Nowhere

For instance, the Canyon Lake Property Owners Association, a private organization in California, received $900,000 of a $15 million water quality improvement grant to buy a dredge. The plan was to improve water quality by dredging a portion of the lake that tended to silt up due to runoff.

Shortly after the dredging work began, a Southern California engineers union filed a complaint with the state’s Department of Industrial Relations (DIR) saying the association should be required to pay the prevailing wage. The DIR agreed, but that made the project financially unfeasible, so the dredge sits in dry-dock.

Priest Becomes Union Target

In Beckley, West Virginia, Forward Southern West Virginia (FSWV), an economic development organization, received a federal grant for construction of an education facility as part of a program to revitalize Beckley’s downtown area.

Construction unions complained the work should be covered by the state’s prevailing wage law. FSWV’s director, Fr. Thomas S. Acker, doesn’t oppose prevailing wages but argues the wage determinations don’t reflect the wages that truly prevail.

Acker is now suing the state to get accurate prevailing wage determinations, and the construction unions have asked the leaders of the Jesuit order to assign Acker elsewhere. Acker is the former president of Wheeling Jesuit University.

Flagmen Paid More than Cops

Massachusetts has a unique problem with prevailing wages. Under a state law only state police officers may serve as a “flagman” on a road construction project. The police union loved this because it helped pile on overtime hours.

Governor Deval Patrick (D) and legislative leaders had proposed saving millions of dollars by using “civilian” flaggers, but they quickly learned the devil is in the details. It turns out Massachusetts’ prevailing wage for flaggers is higher than the cost of using highly paid state police officers.

In normally union-friendly New York a controversy is brewing about applying prevailing wages to economic development. Economic development directors say a prevailing wage requirement on privately financed construction, albeit aided by tax breaks or other government incentives, would be a deal breaker and force companies to look elsewhere to locate new facilities.

Forced to Pay Volunteers

California actually required volunteers to be paid prevailing wages, and several years ago a nonprofit organization there was fined $30,000 for failing to pay prevailing wages to volunteers on a stream bed clean-up.

The legislature enacted a law exempting volunteers, but it had a sunset provision. The expiration of the exemption is nearing, and as lawmakers take up the issue again, some want to make the exemption permanent, but construction union officials are arguing for another limited extension. Perhaps they are waiting for a more favorable political climate to go for complete repeal.

Flawed Formula

The evidence of the impact of prevailing wage laws is virtually limitless, but it doesn’t get to the heart of the problem.

There would be little harm in prevailing wage laws if the wage determinations truly prevailed. They do not. The method for determining prevailing wages is fatally flawed. Even though union density in the construction workforce is less than 14 percent, all too often union wages are determined to be prevailing.

In 2007 construction union density at the state level ranged from 1.5 percent in North Carolina to 37.6 percent in Illinois. The decline in union density also has varied among the states. Between 1983 and 2007 the largest percentage decline occurred in Arkansas, where union density dropped from 19.8 percent of the construction workforce to 1.7 percent, a decline of 91.5 percent. The smallest decline occurred in Alaska, where union density went from 31.1 percent to 30.4 percent of the construction workforce, a decline of 2.1 percent.

The flawed method for determining prevailing wages is coming under increased scrutiny. There is little doubt that as construction union density continues to decline, public budgets are stretched thinner, and unions use political pressure to expand prevailing wages beyond public works, this will become an increasingly controversial topic.

David Y. Denholm ([email protected]) is president of the Public Service Research Foundation, an independent nonprofit organization that studies labor unions and union influence on public policy.