Wednesday, November 21, 2007

"prevailing wage" laws (for unions) and the (higher taxpayer) cost of public projects

from Jim Waters at BIPPS, as reproduced in Budget and Tax News...

This focuses on Kentucky, but applies to all other states. All states are covered by Davis-Bacon which sets up (artificially high) wages for projects with significant federal funding. And about two-thirds of states have their own "prevailing-wage" laws to cover projects with significant state funding. Unions promote these laws since it limits competition from non-union companies.

Prevailing-wage laws added 7 percent--nearly $137 million--to the cost of government construction projects in Kentucky in 2002, the latest year for which figures are available, according to the nonpartisan Legislative Research Commission (LRC)....

For example, while the Bureau of Labor Statistics (BLS) has determined the market-wage rate for Kentucky's plumbers is $18.15, state labor officials have established a rate of $23.75 for plumbers building schools in Owsley County and $26.31 for plumbers working on public projects in Oldham County....

A 2001 survey by LRC determined that while union workers comprise only 22 percent of the state's nonresidential construction workforce, union labor groups account for 81 percent of wage data submitted at public hearings held to establish prevailing-wage rates.

Kentucky's politicians seem easily intimidated by union threats of political retaliation if changes are made to the prevailing-wage system....

In a recent Bluegrass Institute report, researcher Paul Kersey concludes the state needs to encourage more participation by nonunion contractors, who loathe the current wage-setting process.

Doing so would likely result in more market-like wage rates--which are, on average, 24 percent lower than most of the state's prevailing wages.

Kersey suggests changing from the current practice of gathering wages at public hearings--which gives an unfair advantage to unions--to a more discreet process in which the state surveys contractors with at least five employees.

Tennessee Has Model Approach

Kersey also suggests following Tennessee's example of simplifying the prevailing-wage process. Unlike Kentucky, where workers can demand a wage hearing at just about any time, the Volunteer State uses two surveys.

One is an annual survey of road-construction companies; the other surveys nonresidential building construction contractors every other year.

The road-construction survey results in a single statewide schedule of rates, while the building-construction appraisal is divided into 12 districts. The information is used by the state to determine wage rates for 22 separate occupations that are uniform for all districts.

Tennessee hires two full-time workers for about six months of work when the wage determinations are made, greatly reducing administrative costs.

Thirty-three states have prevailing-wage laws. "If you have to have a prevailing-wage program, Tennessee's is the model," said Kentucky State Rep. Jim DeCesare (R), who continues to promote more sound labor policies in the state.


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