Published date: 05/23/2023
Prevailing wages have been critical to the health of the public works construction industry since the Davis-Bacon Act (DBA) was passed 1931. In the broader discussion surrounding the efficacy of regulations, no one really contends that they are not beneficial to workers. After all, who is going to argue that potentially being paid a higher wage is a bad thing for an individual?
What is often debated, however, is the larger socio-economic factors. For example, detractors of prevailing wages tend to bring up construction costs – or more specifically, the effect they have on the taxpayer dollars that fund projects. And make no mistake, there are larger discussions to be had on the alleged drawbacks (even if they are often grossly exaggerated or based on inaccurate claims). But for this blog, specifically, we will focus on the higher-level benefits that are frequently downplayed or blatantly ignored by the parties arguing against prevailing wage.
Because the truth is… statutes of Davis-Bacon and its Related Acts don’t just protect workers from exploitive contractors. They also help yield safer work environments and higher quality work, promote hands-on training programs, create benefits to local communities, and curb reliance on public assistance, among many other things. The impact extends far beyond workers’ wages.
Prevailing Wages Benefit Businesses
First, let’s look at the impact on businesses.
Consumer spending increases. When construction workers receive a more sustainable wage, their gross incomes (and consequently, their spending) increase as well. A larger chunk of these incomes is reinvested back into the community. Generally, this additional spending translates to more revenue for businesses, and it also spurs additional hiring.
Contractors can complete projects faster and with less ancillary costs. Prevailing wages tend to promote the utilization of apprenticeship programs – for which the whole point is to both attract new talent and help equip them with the proper skills needed to contribute to the labor force. For an industry that has long struggled with skilled labor shortages, increasingly more as skilled tradesmen are retiring, this is crucial for construction businesses. Labor shortages can lead to project delays, increase overtime and materials costs, and potentially result in the burnout of your employees – which introduces its own set of issues (i.e. jobsite safety, etc.). Prevailing wages alleviate this by making a career in construction more enticing for workers.
An even playing field is preserved. Prevailing wages encourage the hiring of local firms and prevent unfair competition from unethical contractors who engage in practices like cheating employees, cutting corners with quality, or neglecting safety standards. This can help ensure that all contractors are held to the same high standards, promoting fair competition and better outcomes for everyone involved.
Prevailing Wages Benefit Taxpayers
Skilled labor increases efficiency and productivity of public works. Although it may appear at first glance that prevailing wages only increase labor costs, the influence they have on productivity and efficiency relative to overall project costs is often overlooked. Prevailing wages and apprenticeship programs foster labor that delivers superior quality work with less safety incidents, which can more than compensate for any additional labor costs (think more efficient utilization of time and resources). A majority of the peer-reviewed studies that look into this kind of data validate these assertions. Some even say that the value added for every skilled worker – as opposed to the cheaper, underqualified counterpart – is as much as 15%.1
Dependence on public assistance is reduced. Construction offers a high-paying career alternative to those that do not pursue college education and white-collar jobs. And thanks to recent efforts of many training programs and community groups, employment opportunities in public works construction are increasingly being promoted to helps thousands of disenfranchised individuals throughout the nation. The stability associated with a strong wage allows workers to have more disposable income and therefore enables them to maintain a safe distance from needing public welfare or housing programs, saving taxpayers millions.
Tax revenues increase. The increased disposable incomes that result from more sustainable wages increase the local, state, and federal tax revenues by billions of dollars annually, all while preventing tax hikes and preserving essential public services. Overall, employing these strategies allows projects to be completed more economically, benefiting taxpayers who contribute to this system.
Prevailing Wages Benefit Communities
Race and gender pay gaps are closed. Race and gender pay gaps become drastically reduced by forcing the implementation of wage surveys (the process in which prevailing wages are determined based on location, craft, and experience). This helps ensure that all workers, regardless of their gender or ethnicity, are paid fairly for their work. There is also a benefit to military veterans who often face difficulties transitioning to civilian careers. By providing them with opportunities in the construction industry, where they are more highly represented, prevailing wages offer veterans a pathway to success and prosperity.
Fewer materials are wasted. Because of the higher quality work from skilled labor, prevailing wages promote environmental sustainability by decreasing waste from fuel consumption and materials. These sustainable practices allow job sites to reduce their carbon footprint and contribute positively to the environment.
Thriving residents contribute more to their communities. Prevailing wages allow workers to earn a living wage in their own communities while contributing to the construction of essential public projects. This strategy not only benefits the workers but also contributes to the development of the community as a whole. Since workers are less likely to be imported from elsewhere (outside the community), more jobs are made available to the folks who actually live in these communities where projects are being worked on. These practices can help construction companies create a positive impact on society and the environment while still benefiting their own bottom line.
These materials are being issued with the understanding that LCPtracker is not engaged in rendering legal or other professional services and is providing these for informational purposes only. If legal, accounting, or tax expert assistance is required, the services of a competent legal, accounting or tax professional should be sought.