The prevailing wages paid to workers on public construction projects in New York may be inflated and overcharge taxpayers. Data from the Department of Labor shows median private sector wages for various trades are significantly lower than the prevailing wages paid on public projects. For example, electricians earn a median private wage of $29.42/hour but are paid $43.34/hour on public projects. Prevailing wages are also set without verification that they accurately reflect current market rates. Given budget stresses, New York should reexamine how prevailing wages are determined to ensure taxpayers are not overpaying.

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ON BOARD OPINION A P R I L 1 1 , 2 0 1 1
Prevailing wages in New York:
Are we being overcharged?
By John Faso some since these rates are paid by taxpayers.
The Wall Street Journal recently reported that con-
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ach year, school districts, local governments and struction worker wages and benefit levels in New York
the state government spend hundreds of millions of City have risen 12 percent in the three-year period
dollars (and sometimes billions) on construction between 2008 and 2010, three times the inflation rate.
projects. Part of the cost is paying “prevailing wages” for One union leader was quoted as saying that the actual
labor, in accordance with a state law intended to prevent increases for wages and benefits on private jobs were only
contractors from gaining a competitive advantage by pay- 6 percent and that higher costs are only imposed on public
ing workers less on government projects. But there is a work. If prevailing wages are supposed to reflect market
problem. The “prevailing” wages taxpayers pay are far wages, why aren’t taxpayers getting some advantage from
more generous than what prevails in the marketplace. lower wage and benefit costs experienced in the private
According to data from the state Department of Carpenters receive a median wage of $35,940 to $57,140, sector? One suspects that taxpayers are being overcharged
Labor (DOL), the median wages for various trades paid in depending on the area of the state. But the prevailing wages on public work because neither the state Labor
the different regions of the state are substantially lower paid to carpenters by school districts and other forms of Department or the state comptroller’s office verifies the
than prevailing hourly wages based on collective bargain- government in different parts of the state range from accuracy of prevailing wage rates.
$50,086 to $95,992, with benefits ranging in value from
ing agreements. On Long Island, electricians earn a medi- $27,393 to $71,884, according to an analysis by the author. Given the financial stress which governments at all
an wage of $61,190, or $29.42 per hour, assuming a 40- levels are experiencing in New York, we should question
hour work week. But the prevailing wage every school One possibility for this circumstance is that the data some long-standing assumptions, including how prevail-
district and local government pays is about $43.34 per used to set prevailing wages are inflated. Prevailing wages ing wage rates are determined. One thing schools and
hour, or the equivalent of $90,160 per year. Carpenters in are set each year by DOL based upon collective bargain- localities in a given region could do is to join forces and
western New York earn a median $39,520, while the ing agreements for particular trades in various jurisdic- conduct their own survey to check on the accuracy of cur-
annualized prevailing wage is $58,156. Plumbers in the tions of the state. The collective bargaining rate – essen- rent prevailing wage rates. Given the disparities among
Mohawk Valley earn a median $56,030, while the prevail- tially the union rate – is supposed to be used when 30 per- wage rates as reported by the state Labor Department
ing wage is an annualized $60,112. cent or more of the workers in such trade are represented itself, a legitimate survey is probably the only way to
Benefits are also better on prevailing wage jobs. In by a union which has negotiated a collective agreement. ascertain whether prevailing wage rates are a true reflec-
the private sector, benefits are generally 30 to 35 percent DOL used to conduct wage surveys to ascertain whether tion of the market.
of pay. But our Long Island electrician working on a trade unions represented at least 30 percent of employees
school project would receive benefits valued at $62,420, in a given area in a given trade and to ascertain what the John Faso was 2006 Republican candidate for
or 69 percent of wages. For the western New York car- wage rates were, but no longer. No one in state govern- governor and is a former minority leader of the state
penter and the Mohawk Valley plumber, the comparable ment verifies whether prevailing wage rates accurately Assembly. He is partner in the law firm of Manatt
figures are 80 percent and 65 percent, respectively. reflect true market conditions, which is particularly worri- Phelps & Phillips, LLP.
N e w Yo r k S t a t e S c h o o l B o a r d s A s s o c i a t i o n • w w w . n y s s b a . o r g