The current economic crisis, which is nothing more than a cyclical devaluation necessary to keep the currency from bottoming out, is causing states and municipalities to make decisions about prevailing wage legislation.
In Cedar Rapids, IA, a bill that sets a prevailing local wage, benefits and overtime, is waiting for one more vote in order to become law. In Colorado, a bill that would have established a prevailing wage for employees of contractors was defeated in committee. Some voices in Washington state are calling for the repeal of its prevailing wage law.
Prevailing wage largely affects public works projects and is often credited with driving up the costs of those projects. Although it isn’t really clear that’s the case, even when that idea is advanced by an opponent of prevailing wage. Here is how Mark Latimer, president of the Rocky Mountain Chapter of Associated Builders and Contractors explained it:
In some cases, the prevailing wage is lower than the going rate at the fair-market system. These are decent-paying jobs. We believe the prevailing wage artificially inflates [wages] and drives up the cost of construction. It will hurt the economic stimulus and restrict the free market.
So, if prevailing wages in some cases are “lower than the going fair-market system,” and they are “decent-paying jobs,” how are they going to “drive up the cost of construction?” More to the point it just may be that when prevailing wages are in effect contractors can’t make as much on reselling that labor without pricing themselves out of the market.
Since a person’s labor (expressed as time) is largely the only thing most people have available to sell for their livelihood, perhaps contractors should try to find more value somewhere else in the resources under their control. After all, what is often overlooked in the discussion of prevailing wages is that people are going to spend those wages in the community. So if they have a little extra that’s a good thing, isn’t it?
The other point often advanced by prevailing wage opponents is that the free market does a great job of setting wages. But you have to ask, great for whom? It’s probably true that the free market sets a great wage for a person who is buying the labor, but if you ask a lot of the people supplying the labor they might disagree.
Those on the government side, who propose prevailing wages, sometimes see them as a tool to control those who are eligible to bid on projects. As one legislator in IA put it:
Without it, the state would see fly-by-night, out-of-state contractors coming into Iowa underbidding our standard of living.
So, could it be that prevailing wage offers government a chance to minimize due diligence while it qualifies contracts and enforces building codes and contract delivery? Especially in these times of diminishing budgets having a “safe” pool of bidders could save time and money.
It seems that when you get to the bottom of the prevailing wage issue you find it is simply a manipulation of an already over-manipulated economic system, with proponents and opponents squared off over who will benefit and who will lose. This is no different than most other issues that have economic gravity. Perhaps it would be better to establish a scorecard system where one economic interest is served one time, and another is served the next. That way, at least things might stay a bit more balanced.