Prevailing wage laws help close the income gap among African American and white construction workers, according to an Illinois Economic Policy Institute study (ILEPI) released in February. The income gap between African American and white workers closed by 12 percent in states with these laws.
Pay regulations increased net pay for African American construction workers by 24 percent, compared to a 17 percent increase for white workers, according to Construction Dive.
With wage laws in effect, African American construction workers earn an average of 88 cents for every dollar their white counterparts earn. In states without these laws, African American workers make only 74 cents for every dollar white workers are paid, according to the study.
A prevailing wage requires public works contractors to pay tradespeople no less than wages that prevail on similar projects in the same region. It refers to the rate of pay that contractors and vendors have to offer employees when working with a government agency, according to the U.S. Department of Labor and the Davis-Bacon Act. Many states have adopted prevailing wage legislation for bidding on state and local government projects.
These laws avoid undercutting by out-of-state contractors, especially after natural disasters, like what happened after Hurricane Katrina.
“Prevailing wage laws are important because they ensure workers in a particular area of the country are paid the rate that matches up with the economics of that region,” said Marco Giamberardino, executive director of government affairs at NECA. “That’s the intent—to protect and grow the local economy.”
The ILEPI conducted the study to dispute claims that prevailing wage laws have a discriminatory effect on African American construction workers. The study shows the contrary is actually true—these laws improve all blue-collar incomes, regardless of race.
Every year, sometimes several times a year, there are efforts to undercut prevailing wage laws through piecemeal attacks on the Davis-Bacon Act and federal appropriations bills, Giamberardino explained. NECA and its member contractors continuously urge Congress not to modify or repeal the Act.
“Just like every other industry, our contractors need advocates. That’s our job,” he said.
Some states worry they’re seen as anti-business if they have prevailing wage laws. For example, aluminum manufacturer Braidy Industries is building a $1.3 billion rolling mill in Kentucky, and company officials cited the state’s repeal of its prevailing wage laws as one of the reasons for bringing its business to the state.
One alternative, the Common Construction Wage in Indiana, hasn’t delivered the benefits the public was promised, according to a Midwest Economic Policy Institute study released in January. In 2015, Indiana repealed wage protections for publicly funded projects. Proponents of the repeal promised taxpayers 10–20 percent cost reduction on public works projects, but those savings haven’t come to fruition. And since the law was repealed, wages (down 8.5 percent), productivity (down 5.3 percent) and job growth (down 1.5 percent) have all declined.
Elsewhere, states are taking extra steps to address worker pay. California recently passed a law requiring general contractors to make good on their subcontractors’ unpaid wages if presented with a valid claim. And the Oregon House passed a similar law, which heads to the state Senate next.
“It’s also anti-business to undercut your own populace in your region,” Giamberardino said. “Time and time again, we have to remind everyone why these laws are in place and why they have been for almost 90 years. The law serves a purpose. There’s no sound reason why Congress should pass a law to undercut local employees’ wages.”