Nevada’s so-called “prevailing wage” laws cost taxpayers millions of dollars each year – many of these dollars go into union coffers instead of to workers. Once you know the facts about it, you’ll be as outraged as I am that this politically motivated system has been allowed to continue.
Prevailing wage laws require contractors who bid on public works projects to pay all employees at a rate determined by the Nevada Labor Commissioner. This rate was intended to be the average wage of workers in each category, but in fact, it bears no relation at all to average wages. A carpenter working on a public project may be paid a “prevailing wage” of $37.00 an hour, when someone performing exactly the same work in the private sector earns $22.00 an hour.
It’s easy to see how this could add up to millions of dollars for a large construction project. In fact, a 2011 study by the Nevada Policy Research Institute showed that prevailing wage laws cost Nevada taxpayers nearly $1 billion in excess costs for 2009 and 2010 alone. Across the nation, independent studies show that prevailing wage regulations add 10% to 30% to construction costs.
Nevada’s economic development efforts have also suffered due to its prevailing wage laws. Why would a developer of a large-scale project pay exorbitant wages in Nevada when he can go to a nearly state like Arizona or Colorado, which don’t have prevailing wages, and cut his labor costs by a third or more?
Here’s how it works: The Office of the Labor Commissioner annually surveys employers to gather information on wages paid to workers, and the results of the surveys are used to establish prevailing wages. This data could easily be obtained from the Nevada Department of Employment, Training and Rehabilitation (DETR), which has an entire division that conducts this type of research. So, why the dual reporting system? To give unions an unfair advantage.
Because of the way the system was set up, it’s almost impossible for non-union contractors to fill out the surveys. First, they need to calculate the value of all fringe benefits for each employee and add those calculations to their hourly wage. Second, the job classifications in the survey are designed to fit union definitions, which most non-union contractors don’t use. They don’t have the time or resources to fill out the survey, so even though unionized labor comprises only 13 percent of the workforce in Nevada, it’s union contractors who return the surveys, it’s union wages that are reported, and union wages that become the “prevailing wage.”
It might be argued that the extra money paid for prevailing wages on government projects gives workers more money to spend, creating a multiplier effect. This might be true in the case of non-union shops, but the union system isn’t set up to benefit workers. Union contractors are obliged to deduct a set amount per hour from each worker’s check in order to fund pensions and other benefits. This money goes directly to the union, and if the worker leaves before qualifying for benefits, the union keeps the money. This creates a surplus of funds in union coffers that may be used for political contributions and for lobbying against non-union competition.
It’s time to repeal the prevailing wage law, replacing it with an average wage rate calculated by DETR. At the very least, we should create an exemption on all projects for K-12 schools, giving our school systems more money for vitally needed expenses like teachers’ salaries. As we gear up for November elections, let’s see where candidates stand on this important issue. Want more information, or want to join the fight against this system? Contact the Associated Builders and Contractors at www.abcnevada.org.
Originally published in Nevada Business Magazine: