Over a century ago, New York State established its first prevailing wage law. It was based on the common-sense principle that workers who build something for the public good be paid a fair wage for their work. It’s a deal that’s paid off for countless families who’ve been lifted into the middle class through hard work and sweat equity.
Prevailing wage laws require construction workers who do major jobs for state or local government to be paid at rates that are set through negotiations between businesses and laborers.
The problem today is that more and more big projects are being funded as public-private partnerships, blurring the line of what’s considered “public work.” Construction projects are being built throughout the state, subsidized with public funds, that are able to evade requirements to pay a decent wage to their workers.
Take the Trump Ferry Point Golf Course in the Bronx. New York City taxpayers spent more than $120 million to build a golf course on the site. Trump was then selected to operate the course, and as part of that deal, built a $10 million clubhouse.
Because this part of the project was not clearly defined as “public work,” the billionaire developer was able to do so without wage requirements, keeping the extra profit for himself.
That’s why we need legislation to clearly define public work — and a bill currently under consideration in the state Legislature does just that.
A clear definition of public work will create a bright-line test so there’s no more ambiguity. Under the proposed law, a project will be considered public work if: the construction is paid for in whole or in part with public funds, or the construction is performed in contemplation of a public entity leasing a portion of the space in the resulting development.
This would relieve the state of the great administrative burden of trying to determine whether or not various projects qualify. Furthermore, it would grant the Department of Labor additional enforcement abilities to better ensure that public funds are used appropriately.
The only sticking point is a group of deep-pocketed developers who are launching an all-out campaign to protect their own profits. They argue that paying a fair wage to construction workers will hobble affordable housing development and cripple the state’s economy.
These claims of dramatic cost increases are overly simplistic and inaccurate. Most utilize an analysis that is not accepted by peer-reviewed research in the construction industry.
First, prevailing wages do not raise costs. Labor costs account for roughly 24% of the typical costs of a construction project. Therefore, even a 10% increase in wage costs would account for only a 2.5% increase in project cost. Efficiencies used by high-paying contractors offset these wage costs and result in projects being built on time with fewer errors and change orders.
Second, prevailing wages contribute to economic development. For every $1 spent on prevailing wage jobs, $1.50 is generated for the local community — and more local contractors and local workers are involved in prevailing wage projects.
Prevailing wage also strengthens industries outside of construction by directing more spending into the state. My analysis of data from New York State estimates that revenue for New York’s insurance and financial services industries would increase by over $1.2 billion, adding 3,000 new jobs. Hospitals and health care providers would see an increase in revenue over $75 million and over 460 new jobs. The restaurant industry could expect additional sales over $23 million and the creation of 280 jobs.
As an economist who has spent the better part of two decades researching labor and employment, I can say unequivocally that a prevailing wage is a win-win for the state and for the workers who are able to support their families.
Duncan is a professor of economics at Colorado State University-Pueblo and has been a visiting scholar at the Institute for Research on Labor and Employment at the University of California, Berkeley. This editorial first appeared in the NY Daily News.