This article may be unbalanced towards certain viewpoints. (November 2012)
In government contracting, a prevailing wage is defined as the hourly wage, usual benefits and overtime, paid to the majority of workers, laborers, and mechanics within a particular area. Prevailing wages are established by regulatory agencies for each trade and occupation employed in the performance of public work, as well as by State Departments of Labor or their equivalents.
"Prevailing wages" were first established shortly after the Civil War when US Congress passed the National Eight Hour Day law. Although the Congress had not yet established its authority to regulate private economic matters because of prevailing legal doctrines, it could regulate its own contracts and the targeted public works as a means to indirectly influence other labor markets. Because construction workers at the time were paid on a daily rather than hourly basis, the establishment of an eight-hour day without a reduction of the daily wage rate formally incentivized public works contractors to improve the efficiency and productivity of their workforce rather than the length of their day in order to complete their projects on time.
In 1891 Kansas was the first state to pass a "prevailing wage" for its own public works projects, and over the next thirty years was followed by seven other states (New York 1894, Oklahoma 1909, Idaho 1911, Arizona 1912, New Jersey 1913, Massachusetts 1914, and Nebraska 1923) in establishing minimum labor standards for public works construction. In the midst of the Great Depression, beginning in 1931 and prior to the end of World War II, twenty additional states passed their own prevailing wage laws. In 1931 Congress passed the Davis–Bacon Act after 14 earlier attempts, the Federal Prevailing Wage law that remains in force, bar a few suspensions, to this day.
Prevailing wage may include both wages, benefits, and other payments such as apprenticeship and industry promotion. It encompasses the compensation for a worker given for performed labor.
The Federal Davis-Bacon Act and Related Amendments pertain to federally funded projects. There are also 32 states that have state prevailing wage laws, also known as "little Davis-Bacon Acts". The rules and regulations vary from state to state.
Federal rates are calculated based on regulations established by the US Department of Labor. According to Code of Federal Regulations, "The prevailing wage shall be the wage paid to the majority (more than 50 percent) of the laborers or mechanics in the classification on similar projects in the area during the period in question. If the same wage is not paid to a majority of those employed in the classification, the prevailing wage shall be the average of the wages paid, weighted by the total employed in the classification." State level rates are calculated using various methods including an average of all wage rates paid, the mode, or based on collectively bargained rates.
In the Davis–Bacon Act all federal government construction contracts, and most contracts for federally assisted construction over $2,000, must include provisions for paying workers on-site no less than the locally prevailing wages and benefits paid on similar projects. The Streamlining Claims Processing for Federal Contractor Employees Act (H.R. 2747; 113th Congress), if passed, would make the United States Department of Labor responsible for enforcing this act (instead of the Government Accountability Act) and ensuring that federal contractors did receive the prevailing wage.
Supporters suggest that prevailing wage laws seek to prevent public construction projects from destabilizing a local construction industry and to advance other priorities such as workforce development. Some argue that prevailing wages are needed to prevent the public sector’s large expenditures and strict competitive bidding requirements from destabilizing local and regional construction markets.
By taking wages out of the equation, prevailing wages organize competition around quality, productivity, and efficiency without touching off a "race to the bottom" as contractors underbid one another by lowering the rate of pay earned by their workers. The goal is that, with everyone playing on a level field, contractors seek to maximize their workers' output and their own ability to manage work better than their competition. In practice, a construction project will have most of the same workers on the job whether it is a "prevailing wage" job or not. The employees will be paid at a higher wage scale if the project has been deemed "prevailing wage" either by law or choice.
Opponents of prevailing wage laws suggest that such laws hurt free market competition and causes costs to escalate on public projects, as many calculations to determine the prevailing wage tend to identify union wages and benefits as the benchmark in a given community. They suggest that this does not lead to any tangible benefit to justify the increased cost, either increasing the amount of taxes raise or decreasing the number of public projects that may be undertaken.
- Compensation of employees
- Labour in Economics
- Living wage
- Labor power
- McNamara–O'Hara Service Contract Act
- Wage labour
- Wage share
- Wage slavery
- Working class
- For example, in Washington State the Department of Labor & Industries establishes the prevailing wage.
- Philips, Peter. "Kentucky's Prevailing Wage Law" (PDF). Retrieved 11 July 2011.
- "Title 29 §1 Code of Federal Regulations".
- "Foreign Labor Certification". United States Department of Labor. Retrieved 2012-02-26.
- "H.R. 2747 - Summary". United States Congress. Retrieved 12 September 2013.