In United States government contracting, a prevailing wage is defined as the hourly

wage A wage is payment made by an employer to an employee for work done in a specific period of time. Some examples of wage payments include compensatory payments such as ''minimum wage'', '' prevailing wage'', and ''yearly bonuses,'' and remune ...

, usual benefits and overtime, paid to the majority of workers, laborers, and mechanics within a particular area. This is usually the union wage. Prevailing wages are established by

regulatory agencies A regulatory agency (regulatory body, regulator) or independent agency (independent regulatory agency) is a government authority that is responsible for exercising autonomous dominion over some area of human activity in a licensing and regulati ...

for each trade and occupation employed in the performance of public work, as well as by State Departments of Labor or their equivalents. Prevailing wage may also include other payments such as apprenticeship and industry promotion. In the United States, the

Davis–Bacon Act of 1931 The Davis–Bacon Act of 1931 is a United States federal law that establishes the requirement for paying the local prevailing wages on public works projects for laborers and mechanics. It applies to "contractors and subcontractors performing on ...

and related amendments pertain to federally funded projects. There are also 32 states that have state prevailing wage laws, also known as "little Davis-Bacon Acts". The rules and regulations vary from state to state. As of 2016, the prevailing wage requirement, codified in the Davis-Bacon Act, increases the cost of federal construction projects by an average of $1.4 billion per year.

History

"Prevailing wages" were first established shortly after the Civil War in 1866 when the

National Labor Union The National Labor Union (NLU) is the first national labor federation in the United States. Founded in 1866 and dissolved in 1873, it paved the way for other organizations, such as the Knights of Labor and the AFL ( American Federation of Labor ...

called on Congress to mandate an eight-hour workday. In 1869, President Grant issued a proclamation establishing the 8-hour day for government workers. Although the Congress had not yet established its authority to regulate private economic matters because of prevailing

legal doctrine A legal doctrine is a framework, set of rules, Procedural law, procedural steps, or Test (law), test, often established through precedent in the common law, through which judgments can be determined in a given legal case. A doctrine comes about w ...

s, it could regulate its own contracts and the targeted

public works Public works are a broad category of infrastructure projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community. They include public buildings ( municipal buildings, sc ...

as a means to indirectly influence other labor markets. In 1891 Kansas was the first state to pass a "prevailing wage" for its own public works projects, and over the next thirty years was followed by seven other states (New York 1894, Oklahoma 1909, Idaho 1911, Arizona 1912, New Jersey 1913, Massachusetts 1914, and Nebraska 1923) in establishing minimum labor standards for public works construction. In the midst of the

Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...

, beginning in 1931 and prior to the end of World War II, twenty additional states passed their own prevailing wage laws. In 1931 Congress passed the Davis–Bacon Act after 14 earlier attempts, the Federal Prevailing Wage law that remains in force, bar a few suspensions, to this day.

Implementation

United States

Federal rates are calculated based on regulations established by the

US Department of Labor The United States Department of Labor (DOL) is one of the executive departments of the U.S. federal government. It is responsible for the administration of federal laws governing occupational safety and health, wage and hour standards, unemplo ...

. According to Code of Federal Regulations, "The prevailing wage shall be the wage paid to the majority (more than 50 percent) of the laborers or mechanics in the classification on similar projects in the area during the period in question. If the same wage is not paid to a majority of those employed in the classification, the prevailing wage shall be the average of the wages paid, weighted by the total employed in the classification." State level rates are calculated using various methods including an average of all wage rates paid, the mode, or based on collectively bargained rates. The

H-1B visa The H-1B is a visa in the United States under the Immigration and Nationality Act, section 101(a)(15)(H) that allows U.S. employers to temporarily employ foreign workers in specialty occupations. A specialty occupation requires the application of ...

program requires employers to "pay the prevailing wage or the actual wage paid by the employer to workers with similar skills and qualifications, whichever is higher". In the Davis–Bacon Act all federal government construction contracts, and most contracts for federally assisted construction over $2,000, must include provisions for paying workers on-site no less than the locally prevailing wages and benefits paid on similar projects. The Streamlining Claims Processing for Federal Contractor Employees Act (H.R. 2747; 113th Congress), if passed, would make the

United States Department of Labor The United States Department of Labor (DOL) is one of the executive departments of the U.S. federal government. It is responsible for the administration of federal laws governing occupational safety and health, wage and hour standards, unemploy ...

responsible for enforcing this act (instead of the

Government Accountability Act A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is a ...

) and ensuring that federal contractors did receive the prevailing wage. In the Walsh-Healey Public Contracts Act (1936) the federal government set the

minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. Most countries had introduced minimum wage legislation by the end of the 20th century. Bec ...

equal to the prevailing wage in an area.

Economics

Federal level

According to the non-partisan federal

Congressional Budget Office The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government that provides budget and economic information to Congress. Inspired by California's Legislative Analyst's Office that manages ...

, as of 2016 the Davis-Bacon Act increases the cost of federal construction projects by an average of $1.4 billion per year ($13 billion over 9 years).

California

California California is a U.S. state, state in the Western United States, located along the West Coast of the United States, Pacific Coast. With nearly 39.2million residents across a total area of approximately , it is the List of states and territori ...

, prevailing wage increases the cost of construction, with workers paid prevailing wage making approximately 50% more in hourly rates, and getting approximately double the benefits of non-prevailing wage workers. The contribution of prevailing wage requirements to ''overall'' construction costs has been estimated to be as large as a 40% increase in costs. A 2020

UC Berkeley The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California) is a public university, public land-grant university, land-grant research university in Berkeley, California. Established in 1868 as the University of Californi ...

study of government subsidized affordable housing projects in California found that prevailing wage requirements increased the cost of construction by 13%, or $50,000 per unit.

Support

Supporters of prevailing wage requirements argue that it keeps the earnings of construction workers high and maintains the quality of construction work. Supporters also argue that "if one of the objectives of federal projects is to increase earnings for the local population,", then the requirement "prevents out-of-town firms from coming into a locality, using lower-paid workers from other areas of the country to compete with local contractors for federal work, and then leaving the area upon completion of the work" and prevents

race to the bottom Race to the bottom is a socio-economic phrase to describe either government deregulation of the business environment or reduction in corporate tax rates, in order to attract or retain usually foreign economic activity in their jurisdictions. Whil ...

effects.Malkie Wall, David Madland, and Karla Walter
Prevailing Wages: Frequently Asked Questions
Center for American Progress (December 22, 2020). Supporters point to research indicating that "prevailing wage laws boost worker productivity, reduce injury rates, and increase apprenticeship training, which helps to address the shortage of skilled labor in construction" and additional argue that prevailing wage requirements narrows racial pay gaps. The major supporters of the prevailing wage requirements include

labor unions A trade union (labor union in American English), often simply referred to as a union, is an organization of workers intent on "maintaining or improving the conditions of their employment", ch. I such as attaining better wages and benefits ( ...

, such as the

AFL–CIO The American Federation of Labor and Congress of Industrial Organizations (AFL–CIO) is the largest federation of unions in the United States. It is made up of 56 national and international unions, together representing more than 12 million ac ...

Opposition

Opponents of prevailing wage laws suggest that such laws hurt free market competition and causes costs to escalate on public projects, as many calculations to determine the prevailing wage tend to identify union wages and benefits as the benchmark in a given community.www.dol.gov
/ref> They suggest that this does not lead to any tangible benefit to justify the increased cost, either increasing the amount of taxes or decreasing the number of public projects that may be undertaken. Opponents also state that since the 1930s, other policies (a federal minimum wage) have been put in place to guarantee construction workers a minimum wage. They also point out that the higher wages paid under this policy distort construction projects by incentivizing them to use more capital and less labor, thereby reducing the employment of construction workers. The federal paperwork requirement is also seen to discriminate against small firms.

References

{{reflist, refs= {{ cite web , url=https://www.cbo.gov/budget-options/2016/52225 , title=Options for Reducing the Deficit: 2017 to 2026; Repeal the Davis-Bacon Act , publisher=

, date=December 8, 2016 , accessdate=2019-04-22 , archiveurl=https://web.archive.org/web/20170106192719/https://www.cbo.gov/budget-options/2016/52225 , archive-date=2017-01-06 , url-status=live {{cite news , url=https://www.latimes.com/politics/la-pol-sac-construction-workers-housing-20170512-htmlstory.html , title=Here's how construction worker pay is dominating California's housing debate , last=Dillon , first=Liam , newspaper=

Los Angeles Times The ''Los Angeles Times'' (abbreviated as ''LA Times'') is a daily newspaper that started publishing in Los Angeles in 1881. Based in the LA-adjacent suburb of El Segundo since 2018, it is the sixth-largest newspaper by circulation in the Un ...

, date=May 12, 2017 , accessdate=2019-05-09 , archiveurl=https://web.archive.org/web/20170601120455/https://www.latimes.com/politics/la-pol-sac-construction-workers-housing-20170512-htmlstory.html , archive-date=2017-06-01 , url-status=live

External links

US Department of Labor: Search for Prevailing Wages
Wages and salaries