At a time where many state governments are struggling to function with limited revenues, it is increasingly urgent that the state of Missouri considers reforming and modernizing its prevailing wage act to better reflect real wages in the construction industry and enable a more efficient use of taxpayer funds.
State prevailing wage laws set threshold requirements for payment of prevailing wages on state-funded public works projects. The state prevailing wage laws typically apply only to publicly funded construction projects such as roads or public buildings when state tax dollars are involved. States generally set their prevailing wage in a similar way to the federal DBA: by conducting surveys of local wages and collective bargaining agreements or referring to the federal prevailing wage in their area.
The prevailing wage is determined by the Missouri Department of Labor through voluntary surveys. The wage is then established by the wage terms of collective bargaining agreements already in place, if any, and the reported rates that are paid for construction work in the community where the project will take place. This means that there is not one prevailing wage in the state, but multiple locally dependent prevailing wages, all of which are based on the surveys of construction contractors and subcontractors who choose to respond to the state.
Much of the reason that the prevailing wage survives in its current form is to benefit union labor. Today, labor unions make up only 13.9% of the construction industry workforce,[1] but despite years of low union density in the construction industry, the Department of Labor’s wage survey process still mandates union wage rates more than 60% of the time. By requiring wages above the market rates, prevailing wage laws sustains higher union-sector labor pricing, at the cost of both taxpayer dollars and market rate, non-union construction labor in the private sector.
The Labor Department’s method for determining “prevailing” rates has been criticized for giving too much weight to often higher union wages and too little consideration to lower, nonunion rates that many construction workers in the area receive.[2] In other words, the prevailing wage tends to be the most expensive wage, regardless of what the actual and most common wages in a community might be.
The net result of this practice is that contractors are often times forbidden to pay workers less, even if their workers would accept a lower rate.
The Government Accountability Office (GAO,) an agency of the Federal government, has repeatedly criticized the Davis-Bacon wage determination process – that is, the same process that most states use in setting their own state prevailing wage standards. The GAO specifically points out that “recent efforts to improve the Davis-Bacon wage survey have not addressed key issues with timeliness, representativeness and the utility of using the county as the basis for the wage calculation.”[3] In other words, the method for determining prevailing wage rates is flawed, both for the government and for the majority of workers in the construction industry.
With Missouri’s current prevailing wage law, a hodgepodge of restrictive rules artificially increase the price of the state’s public construction projects, often leading to inefficient capital allocations and cost overruns. If those added costs were offset by higher value, better-performed work, the expense may be worth it; however, the body of research dealing with prevailing wage laws demonstrates that such laws do not, in fact, result in a discernable increase in project quality.
These prevailing wage laws, which mandate the payment of union-sector wages and benefits on contracts for public projects at the expense of private shops that charge the lower, market rate, deserve a studied and thorough reassessment.
[1] U.S. Department of Labor, Union Members Summary, available at http://www.bls.gov/news.release/union2.nr0.htm
[2] Glassman et al. at 38 (2008)
[3] Government Accountability Office, Davis-Bacon Act: Methodological Changes Needed to Improve Wage Survey at http://www.gao.gov/products/GAO-11-152