Group says prevailing wage law cost taxpayers billions
A fiscal watchdog group is questioning the state’s century-old prevailing wage law for construction workers, saying it unnecessarily costs taxpayers billions of dollars a year in added expenses for big road, bridge and other projects.
The Empire Center, a fiscally conservative budget watchdog group, looked at the state’s constitutionally protected prevailing wage law. It requires contractors on public projects to pay their workers the amounts set in unions’ collective bargaining agreements.
The Empire Center’s E.J. McMahon said an analysis of federal data on wages paid finds the law’s interpretation is outdated and that New York may be paying more in taxpayer money than is necessary — up to 25 percent more for some projects in some regions of the state.
“You’re talking about something that’s neither prevailing nor limited to the wage,” McMahon said.
The report comes at a time when there’s a big push to build infrastructure, from rebuilding the Thruway’s Tappan Zee Bridge over the Hudson River to a new Penn Station to Buffalo’s giant SolarCity factory. Gov. Andrew Cuomo said recently that he wants to focus even more on building things.
“We have the most robust infrastructure agenda we’ve had in 100 years,” Cuomo said on April 15.
The price tag on the projects reaches tens of billions of dollars.
The prevailing wage law was begun in the 1920s, and McMahon admits it was well-intentioned, designed to curb worker abuses that were prevalent at the time. It kicks in when union contracts cover at least 30 percent of the workers in a union in a particular locality.
But unions have been declining over the past several decades, and McMahon said there’s no evidence that in some regions and for some projects, the union membership threshold has been met. He said the state Labor Department does not appear to check those numbers. The Labor Department does not make public contract documents that form the basis for setting the wage.
He said he’s not asserting that workers in skilled trades should get minimum wage or not be well-compensated for their work. But, he asked, why not use median private-sector construction wages as a basis instead? He said the savings could be reinvested into more infrastructure projects.
“That translates into billions of dollars more,” he said.
McMahon said the current method for paying the prevailing wage is also masking a larger problem. Some construction union pension funds, like many other pension funds, are on shaky financial footing. There are fewer workers to pay for the benefits for a growing number of retirees. The prevailing wage law requires that contractors contribute a portion of a worker’s wages to health care and retirement benefits, which can represent up to half of an average $96-an-hour pay scale in New York City.
“The law is a way to basically provide a back-door bailout of pension funds that have significant financial problems,” McMahon said.
The prevailing wage requirements are written in the state’s constitution. McMahon is not recommending that the constitution be changed, which would be a lengthy and cumbersome process. But he does say state officials need to reinterpret it differently.
In a statement, a spokesman for Cuomo dismissed the report as “flawed,” and said the administration makes “no apologies for supporting working men and women in New York” while embarking on the “largest rebuilding of this state's infrastructure in history.”
“It’s not a shock that a right-wing think tank would use a flawed report to oppose paying an honest day's pay for an honest day's work and to protect a status quo that has starved New York's infrastructure needs for generations,” spokesman Rich Azzopardi said in prepared remarks.
Politically, going against unions is difficult in New York. Unions support both Democratic and Republican candidates for office with cash donations and volunteers who staff phone banks and go door to door to distribute leaflets. Cuomo has feuded with the teachers unions but generally has a good relationship with other unions.
In fact, even the coalition of Republicans and independent Democrats who run the state Senate have proposed expanding the prevailing wage law to all projects that use some portion of public funds.