State governments across the nation are looking for ways to tighten their belts in the face of declining tax revenues and growing budget shortfalls. In Pennsylvania, legislators have offered a measure that would, they claim, dramatically reduce the state’s construction costs on public works projects by bringing contractors’ wages in line with the prevailing market rates.
On Thursday, the Pennsylvania Assembly’s Labor and Industry Committee debated a measure offered by Rep. Ron Miller (R) that would bring the prevailing wage – or the wage contractors must pay workers when working on a contract worth more than $25,000 – in line with market value.
Under current law, the prevailing wage is determined by the average union pay for a given job. Miller’s legislation would make it the average pay among all workers, unionized and non-unionized. The bill is estimated to save the state “between 30 and 75 percent on labor costs,” according to the Pennsylvania Independent.
For example, an electrician in Cambria County working on prevailing wage would receive $50.24 hourly in wages and benefits, 78 percent higher than the average occupational wage of $28.11 for electricians in the same county. In Montgomery County, a plumber working on prevailing wage will make $65.94 in wages and benefits per hour, 56 percent higher than the average occupational wage of $42.29.
The gap between these types of wages varies depending on the county and the trade, but the prevailing wage is 50 percent higher on average statewide in the 10 most common construction trades, according to data from Pennsylvania State Association of Boroughs, which represents local governments in the state.
Since union shops take on about 30 percent of state construction projects, advocates of the wage change say a minority of all building projects are setting high wage standards for all public projects.
At Wednesday’s hearing, Rep. Miller asked, “Why are the taxpayers subsidizing a small subset of workers within the state who are lucky enough to work on a prevailing wage job?” Miller said that the bill would ensure a better deal for taxpayers.
Rep. Bill Keller (D) responded that current prevailing wage laws in Pennsylvania “protect the taxpayers…by making sure that public works projects are done with the highest skill available.”
Market rates would represent a significant disadvantage for unionized contractors. If the state government were no longer required to pay whatever rate union firms pay, non-unionized contractors could secure more state contracts by offering a better bargain.
That could have something to do with Keller’s outspoken opposition: the $201,400 he received in contributions from organized labor in the 2010 election cycle accounted for 83 percent of his entire campaign haul. Thirteen of his top 20 contributors were labor unions.
Not only would the bill save taxpayer money, it would likely also boost employment in the state. A lower cost for each public works project means more public works projects, which means more people put to work.
As a general rule, high prevailing wages also discourage contractors from hiring young or inexperienced workers, since those workers are most likely to be the least productive, and hence the least likely to be worth the inflated wage their employers are then forced to pay. That generally leads to fewer hires among new job market entrants.
Another bill currently making its way through the Pennsylvania legislature would reduce the number of state government contracts subject to the prevailing wage by increasing the law’s contract value threshold. All contracts worth $25,000 or more are currently subject to the prevailing wage. A bill offered by Rep. Fred Keller (R) would raise that threshold to $185,000 to account for increases in the consumer price index from 1963, when the $25,000 threshold was created.
“This legislation also establishes an automatic cost-of-living adjustment to ensure that the threshold is adjusted each year,” Keller said in a statement. The bill would increase the contract value threshold annually according to increases in the CPI.
“I firmly believe that adjusting the threshold for inflation makes common sense and will help to relieve our municipalities and school districts from Prevailing Wage Act mandates for work on relatively small projects,” Keller added.