Reforming Prevailing Wage Guidelines Can Protect Taxpayer Dollars on Construction Projects

New Yorkers care deeply about whether their tax dollars are being used as efficiently as possible – and they should. So many of our state’s major initiatives are driven by public funds, and it is vital to minimize waste and achieve the greatest value on every taxpayer-funded project.

State law currently requires all contractors on publicly funded projects to pay workers the prevailing wage, which is determined by collective bargaining agreements. A new study by the Empire Center for Public Policy takes a look at the numbers.

REBNY has a long history of working with union partners and we believe that prevailing wage standards play a vital role in many industries across the city. Additionally, we strongly support the role of unions in New York City’s construction industry. However, we believe the Empire Center’s report raises important questions for taxpayers and suggests that reforms to the state’s prevailing wage law could benefit taxpayers without having any negative impacts on the construction industry.

First, it is important to note what prevailing wage means in relation to the size of the overall workforce. New York law states that the prevailing wage applies when union contracts cover at least 30 percent of the workers in a given locality.  However, it is worth looking into whether construction unions are meeting that 30 percent threshold in New York City. The report points out that the New York State Labor Department doesn’t verify that the threshold is being met, and localities are defined on the basis of union jurisdictions.

Data from the 2013 Current Population Survey showed that only around 26 percent of the city’s private construction industry was unionized at that time, according to a 2014 report in the Wall Street Journal.  The report finds the prevailing wage mandate may have increased the cost of publicly funded construction projects by around 25 percent.

Additionally, we must recognize the difference between prevailing wage and “living wage,” which typically refers to the level of pay required to meet the cost of living in a given community. For example, the living wage for an individual living in New York City is around $15 per hour, and the living wage for two working adults living with two children in New York City is around $20 per hour, according to MIT.

The prevailing wage for construction workers in New York City is well above those living wage figures. For example, the city’s current prevailing wage rate for carpenters is around $100 per hour, including wages and benefits. Many other union trades demand a similar rate of pay. These are the wages currently required for publicly funded construction projects under state law.

While REBNY would not support any effort to eliminate prevailing wage in New York, the Empire Center’s report serves as an important reminder of the questions we should be asking about how to reform and improve prevailing wage rules. City and state officials would be well served to fully determine whether the 30 percent threshold is being met. At the same time, we must recognize that the high cost of prevailing wage can become unsustainable for taxpayers.

I look forward to continuing to discuss the need for prevailing wage reform with stakeholders across the city and state.