There is a lot of discussion lately on prevailing wage. It is important to understand more about prevailing wage. Wages are set for areas according to living standards. You wouldn’t want to pay construction wages based on New York City or Los Angeles in Lima, Ohio. Many different entities do this, including health care providers. It just sets wages prevalent to an area.
Does prevailing wage, tend to raise wages some? It sets standards for an area. Training programs that assure work being done is both accurate and efficient under prevailing wage. Otherwise, it becomes an item to undercut the bidding process.
Let’s get to the heart of the issue. To say work done is better or worse under prevailing wage needs background.
A past study out of the University of Utah prepared for the Kansas State Senate Labor and Industries Committee stated these facts when prevailing wage was removed in Kansas:
• Wage incomes in Kansas construction fell 10%. Employer pension and health insurance contributions fell 17%
• Construction workers covered by collective bargaining in Kansas received health insurance and employer contributions, only 10% of workers in open shop received pension and only 4% received health insurance from their employer.
• Apprenticeship training in Kansas construction fell 38% after repel. Minority apprenticeships fell by 54%.
• Serious injury rates in Kansas construction rose by 21%
• The projected gain from repel a 6% to 17 % savings on state construction costs failed to materialize.
A study following school construction in Kentucky, Ohio and Michigan compared prevailing wage issues. In both the same area of time Kentucky and Michigan installed prevailing wage on public school construction while Ohio removed it. The report is too long to list here, but its findings per square foot costs shows very little difference in non- prevailing to prevailing wage. It does lists prevailing as costing slightly less. In a comparison of just Ohio one year after repeal shows no difference.
Further studies show that scrupulous contractors use misclassification of workers under the umbrella of what is known as 1099’s. They hire someone as a contractor yet their job description fits the description of an employer and employee relationship. The difference in a 1099, an employer doesn’t have taxes taken out such as social security, local, state. The employer makes out too as they don’t match social security, workers compensation or state unemployment taxes. These violations have been reported in both Congressional and IRS reviews, yet policing of these misclassifications seem to fall short. The estimated loss of tax revenue in these circumstances is costing billions of dollars in lost tax revenue each year.
And yes, there are laws that can enforce these type misclassifications to include Ohio Revise Code 5747.06, 5747.07, 5747.13 and 5747.01. Why does the state have these laws? Because there have been and are contractors who will misclassify employees to lower projection bidding costs.
Just in review: Non-prevailing laws: lower wages, less health insurance coverage, the possible manipulation of 1099 status as described in analytical and fact finding studies means loss of tax revenues. Local hospitals would be picking up unpaid bill costs as fewer workers are insured. Less training while state is spending millions in training programs including workforce development. Out of state contractors coming in utilizing misclassification resulting in lost work to local and state contractors. Loss of workers tax dollars and spendable income to our community.
The losses described are much deeper in the studies than I have described here. They are not estimates or innuendo but use of factual data in analytical process of determinations. Further studies to include April 10, 2017, Bowling Green–Kent State Study indicate and conclude similar finding as those above.
Why does prevailing wage make sense. It establishes a wage scale that is harder to manipulate and consistent with living costs of an area. Think of it this way. All our State Legislators are paid a specific wage. While the cost of living in Cleveland is much higher than Lima the legislator is paid the same. The taxpayer is bearing the burden of paying one too much or one not enough. In any case a prevailing wage scenario might fit their circumstance very well.
There are good reasons to keep prevailing wage laws in protecting the consumer, taxpayers and the communities from bearing the burden of increasing taxes on its residents to make up for losses incurred as past factual studies on prevailing wage have shown.
Gary Frueh has been active in the Democratic party in Allen County as well as organized labor. Email him at email@example.com