Frequently Asked Questions About Prevailing Wage Regulations

• What are “prevailing wage” regulations?
• How are prevailing wage rates established?
• How does paying workers the prevailing wage affect construction costs?
• Some politicians claim that eliminating prevailing wage requirements for public works projects will reduce construction costs by up to 25%. How do they come up with that estimate?
• What does the prevailing wage mean to my community?
• What will be the impact to my community if politicians reduce the prevailing wage?
• How can I protect strong prevailing wage provisions?

• What are “prevailing wage” regulations?
Prevailing wages regulate the payment of construction worker wages on public construction by mandating that specified wages and benefit contributions are paid for a detailed set of occupations.

• How are prevailing wage rates established?
Prevailing wage rates are established by finding the wage and benefit rate paid to the greatest number of employees in an area. In California, the Department of Industrial Relations conducts a broad survey of employers to determine the wage rates paid to employees in specific occupational categories. The prevailing wage is the wage and benefit rate that is paid to the greatest number of employees is said to prevail.

• How does paying workers the prevailing wage affect construction costs?
This is an area of debate among researchers and there is no consensus about the total cost effects of prevailing wage regulations on public works projects when important factors such as construction specifications, project type, and local economic conditions are held constant. While some researchers have found overall cost increases from prevailing wage regulations, others have shown that cost differentials have no statistical validity and even that certain types of prevailing wage jobs can cost less.

This occurs for several reasons. First, the wage requirements on prevailing wage jobs allow contractors to attract highly skilled workers who require less supervision by management, use materials more efficiently, and create less waste – all of which contribute to cost savings through improved productivity. Second, the experienced construction professionals hired as a result of prevailing wage regulations also have better workplace safety records than unseasoned workers. Reducing on-the-job accidents not only lowers workers’ compensation costs but helps to eliminate costly delays. Third, the use of prevailing wage promotes quality construction by discouraging inexperienced “low-ball” bidders who come in with what at first seems like a better price but quickly escalates as poor quality work and change orders result in cost increases. Experienced workers help ensure that projects are completed on-time and within the contracted budget.

• Some politicians claim that eliminating prevailing wage requirements for public works projects will reduce construction costs by up to 25%. How do they come up with that estimate?
The figure can be traced back to a study that was conducted in the mid 80’s by Fraundorf, Farrell, and Mason and has been discredited because of flaws in its design. Unfortunately, its mistaken findings have been repeated by newspapers and politicians around the country. The study compares the costs of public construction done under prevailing wage regulations with unregulated private construction and concludes that private construction costs about 25% less than equivalent public projects. The study’s major problem is that it does not take into account the difference in quality specifications between public and private jobs. It is like comparing the prices between a Ford Crown Victoria police cruiser and a regular off-the-lot model without ever taking into account the cruiser’s better engine or suspension.

• What does the prevailing wage mean to my community?
By paying workers a fair wage, we help them more than just survive. But prevailing wage regulations do more than simply put more money in the pockets of working families: they feed local economies, develop the next generation of construction professionals, and support our local contractors.

Because prevailing wage rates include benefits, workers and their families are not forced to rely on public assistance for health insurance. Pension contributions mean that these workers are able to maintain a decent standard of living and remain in their communities as they age. Higher wages also allow workers to make ends meet and have something left at the end of the month to spend at their local merchants, keeping dollars and jobs in the community. Additionally, when jobs require payment the prevailing wage, the work is usually done by union contractors who support successful apprenticeship programs that prepare our youth for rewarding careers in the construction industry. Lastly, prevailing wages are also good for local contractors, allowing them to pay their valued employees a decent wage without worrying that an out of area contractor will “low ball” a bid and undercut them only to raise costs later as their less experienced workforce runs into problems.

• What will be the impact to my community if politicians reduce the prevailing wage?
Rural communities will be seriously harmed if anti-worker politicians are successful in reducing the prevailing wage. By reducing construction workers’ wages, these politicians will pull large amounts of money out of our local economies by reducing how much working families have to spend close to home. If they successfully reduce health benefits, those costs will end up being shifted to county taxpayers as the newly uninsured are forced to rely on county funded public health systems. Since reducing the prevailing wage does nothing to guarantee that projects cost less, dollars that would have gone to workers could just as well end up as increased profits.

• How can I protect strong prevailing wage provisions?
Call your City Council and Board of Supervisors’ members to let them know that:
• You care about the quality of workmanship in your local schools, civic buildings, bridges and roads.
• You want to see your public works dollars support workforce development through effective apprenticeship programs;
• You don’t want to undermine local contractors’ ability to compete for public works projects;
• You support keeping the prevailing wage at current levels so that hard working construction workers earn a fair income; and
• You don’t want to see benefit reductions that force working families to rely on the county public health system;