Few public policies carry a more misleading moniker than New York’s “prevailing wage” law for public works projects — a job-destroying cost-escalator that Gov. Andrew M. Cuomo and the State Legislature may be on the verge of expanding as part of their impending state budget deal.

To an average voter living outside the reality-distorting bubble of New York government, the phrase prevailing wage implies the going rate of pay in a competitive market for skilled labor. In reality, what the prevailing wage law imposes on public works is neither truly prevailing nor limited to wages.

New York law requires public works contractors to pay the hourly amount set forth in any union contract covering as few as 30 percent of building trades workers in a given locality. The mandated “wage” includes the unions’ contractual “supplemental benefits,” pegged to the costs of union pension funds and health plans.

And those benefits aren’t cheap. In Nassau and Suffolk counties, for example, the $39.40 hourly pay of union laborers, among the building trades’ lowest paid journeymen, must be supplemented by a $29.56-an-hour contribution to the laborers’ union benefit funds.

By imposing union contracts on public projects, the law requires that work be organized in line with age-old union jurisdictions and occupational classifications — effectively undermining the productivity advantages of nonunion and mixed “open-shop” contractors.

The prevailing wage law boosts the cost of public works by as much as 20 percent on Long Island and 25 percent in New York City, our research at the Empire Center has found. What private developers characterize as productivity-sapping union work rules translates into fewer new highways, transit upgrades, schools, sidewalks and other public improvements.

While the general prevailing wage mandate is embedded in the state constitution, the 30 percent threshold is a matter of state law — which Cuomo’s Department of Labor continues to enforce across the state, even though it’s increasingly clear that union deals no longer cover 30 percent of construction workers statewide. The real number, federal statistics indicate, was 21 percent last year.

Not incidentally, nearly all the building trades unions have growing ranks of retired workers dependent on underfunded pension and health plans. Thus, the prevailing wage law isn’t just a source of new member dues, but of desperately needed fresh cash to backfill retirement plans.

For more than a decade, the construction unions’ highest priority in Albany has been to expand the prevailing wage requirement to a wider range of government-subsidized private projects, including those receiving tax incentives from industrial development agencies. Even with Cuomo’s backing, the effort was making little headway — until the arrival of the Senate’s new Democratic majority, whose members have a knee-jerk tendency to favor anything stamped with a union label.

The Senate majority, like Assembly Democrats, included a provision in its one-house budget bill that would expand the definition of public works to include an array of government-subsidized projects, putting Cuomo on the spot to deliver. He has acknowledged that expanding prevailing wage will mean less work, yet he still talked of forging some compromise that could only have the same result.

New York’s prevailing wage law is a relic of the late 19th century, designed to protect local firms and workers from lower-cost competitors from other regions. What survives is an increasingly costly protection racket for a shrinking but still politically powerful labor cartel.

Instead of expanding the noxious impact of prevailing wage, Cuomo and the legislature should reform the law — so that prevailing wage actually means what it implies.

 

About the Author

E.J. McMahon

Edmund J. McMahon is a senior fellow at the Empire Center.

Read more by E.J. McMahon

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