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 Why Prevailing Wage Matters
Since 1913, the New Jersey Prevailing Wage Act has prescribed basic guidelines for the construction of a publicly-funded project. A prevailing wage is the most common rate paid to construction workers within that region, as determined by the Commissioner of Labor and Workforce Development. New Jersey is one of 31 states with a prevailing wage law.
A long history of prevailing wage laws in the United States provides conclusive evidence of their overall benefit to construction workers and communities alike. Defining a standard rate of pay keeps construction costs within budget, eliminates unlawful contractors from undercutting workers' wages, and creates a stable, thriving market within the community where construction occurs.
Prevailing wage projects tend to deliver a superior construction product at equivalent or lower costs than those projects without prevailing wage standards. Additional benefits include shorter project timelines, additional income for local governments, higher consumer spending within local markets, increased workplace safety standards, and the creation of good-paying jobs for less educated workers.
Since its inception, the notion that prevailing wages provide a higher societal benefit has been debated by both critics and supporters alike. In testimony before Congress in 1995, national education and workforce development expert Dr. Anthony P. Carnevale stated, "Construction is one of the few remaining sectors where workers with limited classroom education can make a living wage and support a family.” Prevailing wage laws help to maintain wage standards in the construction industry and thus, improve the likelihood that
construction jobs will continue to provide an avenue for economic mobility for less educated workers.
The argument that lower wages on public works projects will result in an overall lower cost to taxpayers is a subjective view overwhelmingly debunked by decades of academic or professional studies. In fact, higher wage workers are 20% more productive than those receiving lower wages due to superior training and experience. Because of prevailing wage laws, therefore, public projects are completed within a shorter timeframe, preventing the payment of overtime wages and other overrun costs. For example, one 2004 study analyzed 14 years
of data specific to labor wages within the context of overall cost of public highway construction. The report concluded that higher wage workers, due to their advanced training and collective experience, cost taxpayers 4% less per mile than non-prevailing wage earners.
Furthermore, advanced training in professional construction trades equals greater overall knowledge and implementation of safety standards. Construction jobs have a fatality rate of 23% although they make up just 6% of the total workforce. Prevailing wage laws ensure payment of health benefits to workers. Without such stipulation, failure to pay workers' compensation insurance shifts health care costs from employers to public health "safety nets."
Moreover, higher earnings lead to increased consumer spending on the local level. In fact, one argument may conclude that prevailing wage laws promote the use of local labor, and therefore contribute to higher consumer spending proximate to the construction project. A report authored by Mark Zandi of Economy.com proves that each dollar paid in prevailing wages produces $1.50 in local economic activity. This correlation inherently benefits local business and non-construction markets.
For nearly 100 years, New Jersey has required companies that wish to engage in public works contracts to pay their workers a wage, which justly matches those commonly received in the area. The necessity to protect prevailing wage laws is especially significant today, when an economic downturn can lead to unfair competition. The cornerstone of that public policy is the concept that government, as a leading purveyor of construction services, must choose the contractor that satisfies the lowest responsible bid criteria without depressing
local wages.
Furthermore, American workers and employers alike have consistently supported the notion that good public policy should encourage government to enhance the welfare of workers and their families when intervening in the local marketplace. The protection of prevailing wages is vital to the health of the state and its residents. The detrimental effect of displacing New Jersey businesses and workers at a time when they cannot withstand the burden underscores its time-tested legitimacy.
Click here to learn more
about New Jersey's Prevailing Wage laws
and rates.
http://lwd.state.nj.us/labor .
Why Prevailing Wage Matters (More info Newsletter)
More Resources for Prevailing Wage:
PREVAILING WAGES AND GOVERNMENT CONTRACTING COSTS
A review of the research
A Performance Audit of the Pennsylvania Department of Labor and Industry's Prevailing Wage Program
Davis-Bacon Works. Prevailing Wage laws Are Good For America
Making Hay When It Rains:
The Effect Prevailing Wage Regulations, Scale Economies, Seasonal, Cyclical And Local Business Patterns Have On School Construction Costs
Michigan Prevailing Wage Act
The Adverse Economic Impact from Repeal of the Prevailing Wage Law in Missouri
Quality Construction— Strong Communities:
The Effect of Prevailing Wage Regulation on the Construction Industry in Iowa
Prevailing Wage Studies
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