A P R I L 1 1 , 2 0 1 1ON BOARD6 OP IN ION

Prevailing wages in New York:Are we being overcharged?By John Faso

Each year, school districts, local governments andthe state government spend hundreds of millions ofdollars (and sometimes billions) on construction

projects. Part of the cost is paying “prevailing wages” forlabor, in accordance with a state law intended to preventcontractors from gaining a competitive advantage by pay-ing workers less on government projects. But there is aproblem. The “prevailing” wages taxpayers pay are farmore generous than what prevails in the marketplace.

According to data from the state Department ofLabor (DOL), the median wages for various trades paid inthe different regions of the state are substantially lowerthan prevailing hourly wages based on collective bargain-ing agreements. On Long Island, electricians earn a medi-an wage of $61,190, or $29.42 per hour, assuming a 40-hour work week. But the prevailing wage every schooldistrict and local government pays is about $43.34 perhour, or the equivalent of $90,160 per year. Carpenters inwestern New York earn a median $39,520, while theannualized prevailing wage is $58,156. Plumbers in theMohawk Valley earn a median $56,030, while the prevail-ing wage is an annualized $60,112.

Benefits are also better on prevailing wage jobs. Inthe private sector, benefits are generally 30 to 35 percentof pay. But our Long Island electrician working on aschool project would receive benefits valued at $62,420,or 69 percent of wages. For the western New York car-penter and the Mohawk Valley plumber, the comparablefigures are 80 percent and 65 percent, respectively.

One possibility for this circumstance is that the dataused to set prevailing wages are inflated. Prevailing wagesare set each year by DOL based upon collective bargain-ing agreements for particular trades in various jurisdic-tions of the state. The collective bargaining rate – essen-tially the union rate – is supposed to be used when 30 per-cent or more of the workers in such trade are representedby a union which has negotiated a collective agreement.DOL used to conduct wage surveys to ascertain whethertrade unions represented at least 30 percent of employeesin a given area in a given trade and to ascertain what thewage rates were, but no longer. No one in state govern-ment verifies whether prevailing wage rates accuratelyreflect true market conditions, which is particularly worri-

some since these rates are paid by taxpayers.The Wall Street Journal recently reported that con-

struction worker wages and benefit levels in New YorkCity have risen 12 percent in the three-year periodbetween 2008 and 2010, three times the inflation rate.One union leader was quoted as saying that the actualincreases for wages and benefits on private jobs were only6 percent and that higher costs are only imposed on publicwork. If prevailing wages are supposed to reflect marketwages, why aren’t taxpayers getting some advantage fromlower wage and benefit costs experienced in the privatesector? One suspects that taxpayers are being overchargedon public work because neither the state LaborDepartment or the state comptroller’s office verifies theaccuracy of prevailing wage rates.

Given the financial stress which governments at alllevels are experiencing in New York, we should questionsome long-standing assumptions, including how prevail-ing wage rates are determined. One thing schools andlocalities in a given region could do is to join forces andconduct their own survey to check on the accuracy of cur-rent prevailing wage rates. Given the disparities amongwage rates as reported by the state Labor Departmentitself, a legitimate survey is probably the only way toascertain whether prevailing wage rates are a true reflec-tion of the market.

John Faso was 2006 Republican candidate for governor and is a former minority leader of the stateAssembly. He is partner in the law firm of Manatt Phelps & Phillips, LLP.

N e w Y o 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

Carpenters receive a median wage of $35,940 to $57,140,depending on the area of the state. But the prevailing wagespaid to carpenters by school districts and other forms ofgovernment in different parts of the state range from$50,086 to $95,992, with benefits ranging in value from$27,393 to $71,884, according to an analysis by the author.