San Diego’s City Council has taken the first steps toward requiring California’s construction wage, often incorrectly referred to as a “prevailing” wage, for all construction work paid for by the city’s taxpayers. Those who support this expensive idea say it won’t raise the cost of construction and it will promote the use of local construction workers.
Both claims are refuted by reality. Several years ago the city wanted contractors to do significant work on a major water treatment facility. It was first proposed without the intrusion of mandated wages. The City Council, under pressure of a threatened lawsuit, added the artificial wage system to the project’s specifications.
As a result of council’s action, bidders were forced to recalculate their proposed prices. The contractor that eventually was identified as the low responsible bidder and was awarded the work said his revisions increased the cost of the project by more than $1 million. The contractor stated that the large cost increase was based entirely on the increased wage levels with which the contractor had to comply.
This merit shop firm did most of the work with its own work force. It used the same subcontractors it had planned to use when it first calculated the cost.
I’ve seen no reports of poor quality. Nothing has appeared anywhere that I can find indicating the work, which has been completed, came in over budget. The only thing that changed was the cost to taxpayers. A million dollars could have repaired a lot of streets.
Those who support the predetermined wages in California almost always claim they are good for the local construction worker and protect the economy in the immediate region.
While the above example is anecdotal, it has in fact been replicated many times across California and the country. The body of evidence continues to grow and reinforce the position that when the state decides what the cost of something should be, it is always wrong. That includes the cost of labor.
If the California construction wage system were reasonably accurate in identifying “prevailing” wages, it would have no impact on project costs. The only time the application of the state’s predetermined wage system makes a difference is when the wages are higher than what is normally paid for comparable work in the area.
The arguments for the wage system are as wrong as they are sexy. That makes it very difficult for the City Council to reject the idea. The situation gets even more complicated because the California Legislature is poised to pass legislation that would deny state money for construction projects to any charter city, like San Diego, that does not use this artificial construction wage system.
When the issue of requiring excessive wage levels went before the City Council’s Rules Committee, the room was full of representatives of organized labor. That fits.
The state’s idea of a reasonable construction wage is the amount agreed to by construction unions and union contractors. Once again, the unions in San Diego and Sacramento want to bully local taxpayers.
The union construction wage rates themselves are illustrative. For the 17 primary journeyperson construction classifications in the current wage determination for San Diego, the lowest annual rate including fringe benefits is about $57,500. The highest is $123,700. Those are the rates taxpayers would have to pay if the City Council approves the application of the wage system.
I don’t know how much money the city gets from the state for construction, but with predetermined wage requirements adding at least 10 percent to the cost of construction, citizens will be well ahead of the curve to forego that state taxpayer provided money.
When I began my career with the construction industry I believed that construction wage laws for public work made sense. It sure sounds good. With more experience, I came to think that if this good law were just managed correctly it would be helpful.
Over the years I have realized it can’t be made to work and that it distorts the cost of public construction. This is bad law and nothing will make it work well.
California’s construction wage system is not a good idea. It is no better than the short-lived wage and price controls President Richard Nixon imposed in 1971, something many have called a monumental failure. It should not be added to San Diego’s financial burden.
George Hawkins is retired after 35 years as a construction industry association manager. He was broadcast reporter and news anchor in Denver. As a Navy officer, he saw action in Vietnam in the River Assault Squadrons and is the recipient of a Silver Star and Purple Heart.