Thirty-two states, the District of Columbia and the federal government have prevailing-wage laws aimed at protecting a community's standard of living and the local tax base, experts say.
These laws are a counterweight to government's emphasis on low-bid contracting that can lead to a "race to the bottom" on labor costs, which is economically destructive to a local region's standard of living, said Fred Kotler, a research associate with Cornell University's School of Industrial and Labor Relations.
"The policy is straightforward: Government has a responsibility to respect a community's labor standards and not be a force for driving down wages," Kotler said.
In addition, prevailing-wage laws enhance a region's economy by preserving local jobs, said Christopher Nicolino, an assistant district attorney in Suffolk County who prosecutes prevailing-wage cases. Flouting the law enables contractors to keep a larger share of public money, at workers' and taxpayers' expense, he said.
Prevailing-wage laws require contractors doing public works projects to pay wages and benefits equal to or higher than on similar projects in a particular area.
When workers are paid what they're legally entitled to, the government collects payroll tax, unemployment insurance and workers' compensation contributions from those earnings. Dishonest contractors who don't pay prevailing wages shift those costs to the rest of us, Nicolino said.
"I don't know that the public really has an appreciation of how it's affecting them and their bottom line -- how they are subsidizing these companies that are violating the law," he said.
These wage laws had their origins in concerns that poorly paid construction workers would become a roving workforce on public projects, "stimulating cutthroat competition, impoverishing local construction workers, turning middle-class, blue-collar workers into burdens on the local community," said Peter Philips, a labor and economics professor at the University of Utah and a leading expert on the construction industry and prevailing wage.
Long Island played a key role in the birth of the federal law that mandates prevailing wages for the construction of federal public works projects.
A contractor from Alabama in 1927 was selected to build the Northport Veterans' Bureau hospital in Rep. Robert Bacon's congressional district. New York had become the second state to introduce state prevailing-wage laws, in 1894, but the hospital was exempt because it was a federal project. Bacon pushed for a bill requiring contractors on federal public works projects to pay wages in line with state prevailing-wage laws.
President Herbert Hoover signed the Davis Bacon Act on March 3, 1931.
Prevailing-wage laws have critics. Nicole Gelinas, a senior fellow at Manhattan Institute who studies urban economics and infrastructure, said mandated prevailing wages "artificially inflate labor costs" because they tend to reflect union collective bargaining rates, not what an employee might accept.
Philips has studied the effects of prevailing-wage laws on school construction costs in the United States and Canada and found they do not raise project costs. Focusing on labor costs alone is shortsighted, he said.
His research found that construction-related fatalities are 25 percent lower among workers where prevailing wages are paid. Workers also have better training and more robust health coverage. Contractors' compliance with unemployment and workers' compensation insurance contributions is also higher, Philips said.
A 2008 study of prevailing-wage law and public construction in Louisiana found a connection between poorly paid workers and a fraying of a community's standard of living. Louisiana's state prevailing-wage law was repealed in 1988. Twenty years later, local wages for construction workers had fallen to 80 percent of the national average, Philips' research shows.
Rep. Peter King (R-Seaford) was among 38 House Republicans who spoke against President George W. Bush's decision to suspend the Davis Bacon Act for Gulf states' reconstruction after Hurricane Katrina. The move meant contractors would have been free to pay any wage above the federal minimum of $5.25 an hour for workers.
"The thinking was it was important to get . . . reconstruction underway pronto," King said. The Bush administration quickly reinstated the law. "They realized it was better for the overall standard of work to have prevailing-wage contractors and workers," King said. He called prevailing-wage regulations "essential."
"They provide stability," he said. "They ensure a better quality of work, make it more difficult for fly-by-nighters to come in from out of state and do a shoddy job and undercut local workers," King said.