Hard work, education, job training, integrity and the foundation of family have been and always will be the source of American strength. There is no question that without quality job training and skills, we may lose the innovation that leads to the competitive advantage in American workers.
The centerpiece of ensuring these values in the construction industry is prevailing wage law. Prevailing wage is the area’s modal wage that contractors pay for the appropriate trade. Communities adhering to the prevailing wage are sheltered from out-of-state contractors who undercut the local work force. They ensure there is a level playing field among bidders by factoring out the labor costs most prevalent for each trade in the area. And every dollar spent on construction projects is recycled into the community through an increase in consumer spending and resultant tax revenue that comes from family-sustaining income.
However, the most important benefit of prevailing wage law is its role in career development. California’s Labor Code requires a minimum of one apprentice for every five journeyperson hours worked on a construction project. Projects that pay prevailing wages create a pipeline for the next generation of skilled workers through state-certified programs.
I am personally a product of the opportunity that prevailing wage laws create in the construction trades. Just six days out of the Marine Corps, I was lucky to become an indentured apprentice on a prevailing wage job and to learn a skilled trade in insulation. Looking back, that opportunity had a greater impact on my professional career than all others combined.
In public works projects, prevailing wage laws safeguard against irresponsible contractors, insure against hidden costs and provide the best value for taxpayers.
Safeguarding against irresponsible contractors
Prevailing wage law requires certified payroll on construction projects that helps enforcement against misclassification and wage theft. According to a 2000 study commissioned by the U.S. Department of Labor, as many as 30 percent of firms illegally misclassify their employees as independent contractors. In addition to harming workers, independent contractor misclassification costs all levels of government billions each year in lost tax revenue.
Insuring against hidden costs for taxpayers
True cost of a project for taxpayers is often not reflected in the line item of a bid award. Almost a third of construction workers in California do not have health care coverage. Taxpayers spend thousands of dollars in the cost of uncompensated care and Medi-Cal for each of these workers. Taxpayers also foot the bill in the form of unmerited change orders and increased repair costs.
Best value at no added cost
Overwhelming evidence based on the actual cost of public construction projects shows that prevailing wage laws do not raise costs. Workers on prevailing wage projects produce at a rate of about 15 percent more value per worker than non-prevailing wage projects. The use of productive work force, labor-saving technology and management practices keeps per-square-foot costs low. A study published in the Journal of Education Finance in spring of 2002 showed that public school construction costs did not change because of prevailing wage laws.
Some questionable studies suggest that paying prevailing wages increases cost of construction by as much as 20 percent. This claim does not pass the laugh test. According to the 2007 Economic Census, labor costs account for no more than 22 percent of construction costs. The rest of the components of a bid include materials, management, equipment rentals, administration, fuel and earnings. So the savings are phantom.
Another way to spin the numbers is to compare apples to tomatoes. The city of Oceanside claims that it saved more than $800,000 in its Harbor Aquatic Center by exempting itself from state prevailing wages. It omits to mention that the project itself changed by eliminating a restroom and reducing square footage, and the costing methodology changed by excluding contingency fees. Now the city has opened Pandora’s box by abusing the charter and opening it to further divisive political agendas in the community.
The reality is that the number of bids and construction costs are a function of the economy. Even though prevailing wages have remained stable over the past five years, public works construction costs in agencies have declined to more than a fifth below the engineer's estimate over the last several years, because of a weak economy.
Unfortunately, a cottage industry of contractors’ lobbyists has sprung recently to dismantle prevailing wages at a local level. They are backed by contractors whose “race to the bottom” business model is predicated on assembling a low-wage, low-skill, easily exploitable work force, that could exact a deleterious toll on taxpayers and the community. Under their influence, cities like El Cajon and Escondido are threatening to adopt charters that exempt their contractors from following state law on prevailing wages.
This is a dangerous, slippery slope that will jeopardize the training of the next generation of skilled trades in California. This is why the State Building & Construction Trades Council argued before the California Supreme Court on Wednesday that state’s prevailing wage law applies to all charter cities when they contract to construct public works projects with municipal funds. We believe that when deviant cities like Vista, Oceanside or San Diego unilaterally undermine prevailing wage laws, they defund statewide apprenticeship programs in construction and lower labor standards in California.
Charter cities should not mess with California’s prevailing wage law. This is not about the insular rights of some cities to erect ideological walls within their geographic limits. It is about the universal rights of workers, both union and nonunion, to work on a public project anywhere in the state and to be compensated fairly. It is about promoting apprenticeship training for all crafts statewide, so that the opportunities are open to all workers, whether or not one is located in a charter city that participates in the program. If you use public funds, pay the prevailing wage.
Lemmon is the business manager of the San Diego County Building and Construction Trades Council AFL-CIO overseeing 22 trades affiliates and 14 joint labor-management apprenticeships.