Prevailing Wage It Doesn't Add Up.
The concept of “prevailing wage” was introduced by a Republican Congressman from New York that was offended by low-wage African-American workers from the South working on a federally-funded project in his district. There was no evidence that the work was shoddy; he was just upset that local contributors didn’t get the work. The Congressional Record would certainly be censored today in his description of the winning bidders.
Racism and local-bias still plays a role in this massive abuse of taxpayer funds. And Minnesota’s prevailing wage law is even
more abusive than most state laws, using the statistically meaningless
“mode” from a non-scientific survey to obtain the highest wage possible. Over the last two decades, several states have repealed prevailing wage, and it is time for Minnesota to do the same.
Survey flawed
The prevailing wage survey, taken once per year by the Minnesota Department of Labor and Industry, has a return rate of less than one-percent. Most contractors do not fill out the survey because the data has inadequate legal protection and opens the contractor to liability without offering compensation. The survey instructions offer little guidance about how to fill out the survey, and do not define employee classifications in any meaningful way. As result, two-thirds of all wage rates in Minnesota are not set locally each year because not enough survey data is returned to even set a rate.
Calculation is obscene
Once the limited data set is returned, most prevailing wage laws use the statistical average (the mean or median) to find a typical wage. Minnesota’s law calls for the “mode” or most frequently occurring, calculated to the penny, including fringe benefits. This method was used to set the wage at the collectively bargained rate, and to deliberately disenfranchise the 3/4ths of workers who work for merit shops and have a diversity of wage rates.
If that situation were not bad enough, the calculation gets worse when you consider what happens when there are two wages tied. In that situation, the law shows its bias by automatically selecting the highest rate. When it comes to labor rates, it seems that prevailing wage wants the highest bidder, not the lowest, or even a happy medium.
Local contractors first
The simple reality is that with all things being equal, the local contractor is automatically going to have an advantage in bidding. Local contractors know the project best, have local workers that don’t need to be paid a travel stipend, and have hired local people at the appropriate rate for the area.
The fact is that more often than not, prevailing wage is used to raise the rate so that companies from big cities can compete. Without mandatory inflated wages, they could not travel to your area and compete.
No quality or on-time improvement
One of the constant arguments in favor of prevailing wages are that it will improve quality or timeliness of a project. Put simply, study after study has shown no correlation. Job specifications and oversight are the appropriate tools for quality and timeliness, and have a demonstrated effect. Prevailing wage has no impact.
Inspection costs
A recent study by the City of Mankato found that adopting prevailing wage would cause a $5,000 per project monitoring cost for the city. Once adopted, local governments must collect and inspect wage forms and audit compliance, requiring at least a part-time worker to be trained to monitor prevailing wages. And the $5,000 figure does not include the costs of litigation when a complaint arises.
It doesn’t add up
In the end, studies have shown that Minnesota’s prevailing wage law adds 7-10% to the cost of a project, and no measurable benefits for the city or taxpayer are shown. At best, prevailing wage increases wages for some workers (construction), by taxing everyone else more to pay for it. At worst, it is a racist system to exclude the majority of workers who choose to worker on a merit system.
Calculate Current Prevailing Wage
Minnesota's prevailing wage law (Minnesota Statutes 177.41 through 177.44) requires employees working on state-funded construction projects or other projects covered by law be paid wage-rates comparable to wages paid for similar work in the area where the project is located. Click Here to calculate.
If you have concerns about prevailing wage, please contact ABC for more information and real life examples of how prevailing wage works against local workers and taxpayers.