Prevailing Wage Primer: Need to Know

Date: June 09, 2017

As we enter the final days of the legislative session, lawmakers in New York are prepared to vote on a bill (S2975/A5498) that would put in place the largest expansion of prevailing wage rates in the country. It has been and remains one of NFIB NY’s top priorities to oppose this job-killing legislation. The Empire Center for Public Policy recently released a report entitled Prevailing Waste: New York’s Costly Public Works Pay Mandate, which provides in-depth analysis about how the wage mandate affects costs and productivity.

Here is a brief primer on prevailing wage:

What is current law related to prevailing wage?

The New York State Constitution includes a prevailing wage requirement that is implemented through Section 220 of New York State Labor Law, which applies to construction and maintenance work for the state, municipalities, school districts and public authorities.

Prevailing wage is a mandated amount set forth in union contracts covering at least 30 percent of workers in specialized titles in a locality. The calculation of prevailing wage includes union benefits that can exceed hourly dollar pay.

What is the proposed legislation?

This legislation would subject all projects financed, in whole or in part, through certain public entities, to prevailing wage rates.

How is prevailing wage calculated?

The New York State Department of Labor calculates prevailing wage for state and local government projects using union contracts as a basis. In New York City, the comptroller calculates the prevailing wage rate. The Department of Labor does not make the contracts used for rate setting public.

Prevailing wage rates don’t just apply to hourly payments. The rates include benefits to subsidize union pension and welfare plans that are under-funded for the long-term due to an aging construction workforce, according to the Empire Center’s report.

Why does it matter to my business?

Prevailing wage rates do not reflect local labor costs but instead are influenced by union-level rates. Expanding prevailing wage discourages small business contractors from bidding on projects. When prevailing wage mandated rates are above a community or region’s market value for labor, large contractors attracted by high wages bid on the projects, pushing out smaller contractors. Compliance burdens associates with prevailing wage mandates including record keeping and reporting also discourage small local businesses from bidding on work.

Taxpayers should know that prevailing wage rates also add billions in costs to projects across the state, which means fewer projects are completed (fewer jobs in construction) and higher taxes. The Empire Center for Public Policy’s report found that the prevailing wage law has a significant cost impact throughout the state. Depending on region, prevailing wage rates added between 13-25% to costs.

What is NFIB NY doing to oppose expanding prevailing wage rates?

Business owners and advocates also spoke with lawmakers about the reasons they should VOTE NO on the proposed bill on Small Business Day at the Capitol last month. Each year, NFIB NY tracks, monitors and weighs in accordingly on a dozen bills that would expand prevailing wage rates to apply to employees from service workers to highway and construction workers.

When these bills move through committees, NFIB writes memos to oppose the legislation and meets with lawmakers to ensure that they understand the negative impact that expanding prevailing wage rates will have on small business and taxpayers. Please keep an eye out for Action Alerts asking you to contact lawmakers when these bills come up for votes.

Related Content: Small Business News | Labor | New York

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