Prevailing Wage Myths Busted

Prevailing Wage laws have been a centerpiece of Minnesota’s excellent construction industry.  In brief, these surveys of prevailing wages paid in various parts of the state allow local contractors to pay fair wages on local jobs without out-of-town fly-by-night shysters who don’t care about our communities undercutting contractor bids by slashing wages (a practice which naturally also tends to attract less-qualified workers.)Minnesota’s prevailing wage laws protect our local business owners and their workers.

There are some contractors that are unhappy their business mode (paying workers less) just doesn’t fly in Minnesota. They place similar sized bids, of course, but to compete for projects covered by prevailing wage agreements (not all construction projects are) they’d have to pay employees more fairly rather than the owner getting a big bonus. When such cut-rate business owners aren’t allowed to lowball their competitors on how little they can pay their workers, or pass along cost over-runs from slow or shoddy work — in other words when they’re forced instead to compete on skill, efficiency, and work quality — they whine, and try to change the rules.

MN prevailing age laws have protected and helped working familiesSo instead of investing in training, paying their people more or getting better at what they do – they are trying to drive wages down to their level.

This is a big issue for Minnesota’s construction workers. There is a group of people that are trying to devalue the highly-skilled, highly-trained labor that sets Minnesota well-above the average just to line the owners pockets.

Here are some of the issues that frequently are discussed regarding Prevailing Wage – it’s important to correct the myths and half-truths.

  • Cost of Public Construction
  • Local Contractors and Workers on Local Projects
  • Changing Calculation
  • Lowering Construction Wages
  • Changing Overtime Calculations

Cost of Public Construction

Consider this:
In 2010, MNDOT projects statewide finished more than $67 million under budget. Prevailing Wage laws meant the department attracted the high-quality workers who work efficiently and get the job done right the first time.

It may be tempting for some to assume state construction costs are somehow higher because of prevailing wage laws, but that’s not what’s really happening in Minnesota’s construction industry. In fact, MNDOT data shows it’s an absolute myth.

Local Contractors and Workers on Local Projects

Here are the facts on state project dollars in our area:

In SD – 55% of DOT dollars spent in 2010 were awarded to out of state contractors
In ND – 46% of DOT dollars spent in 2010 were awarded to out of state contractors
In MN – 8% of DOT dollars spent in 2010 were awarded to out of state contractors

These numbers speak for themselves – MN prevailing wage is working very well to protect local contractors and workers from out-of-state lowball bidders relying on cheap labor.

Changing the Calculation

Those that wish to weaken prevailing wage laws often often suggest one problem is the way it’s calculated, which they naturally seek to change to their advantage.

The fact is every state that calculates their own prevailing wage rate does it slightly differently, but most rely on the statistical “mode” – which is what Minnesota uses.

Mode-based calculation uses actual wages being paid to real workers rather than statistical constructs that under-represent wages.  Opponents of prevailing wage want to switch to an average, which would result in the prevailing wage being something that no worker actually makes. They’re after a mathematical formula not a real world example connected to area standards.

Some suggest mode calculations lead to the union rate being the prevailing wage too much of the time.  That wouldn’t necessarily be bad, but it’s plain not true.

Minnesota’s Legislative Auditor found that 51% of the time the union rate is the same as the prevailing wage.  More to the point, the prevailing wage is the same as the union rate in areas where union construction is more prevalent, and it is less than the union rate where cut-rate contractors and business owners predominate. The rate is not the same state-wide, and so there’s no evidence to support the change since all it does is favor the business owner over the actual workers. Many studies point to the result, which boils down to the common sense reality, “you get what you pay for.”

Changing Overtime Calculations

How else could the greedy owners make more money?  Well, if they get the winning bid, but got the same work for less wages by tinkering with overtime pay, they’d pocket the difference.

They want to suspend the current overtime law, which applies after 8 hours worked in any day, to overtime after four 10 hour days.

This is a bad idea for several reasons:

  • Construction work has to go on as long as the sun is shining – workers “make hay” when the ground isn’t frozen, that’s how it is.
  • The proposal isn’t about helping the employees go home early – this is about contractors being able to shift crews around to avoid paying overtime despite getting the same number of hours of work!
  • If it rains and you end up working 10 hours Monday, Tuesday, Wednesday and then another 10 hours Saturday – you would be getting no overtime pay for Saturday, or any other day you worked past 8 hours.
  • The bottom line is this scheme takes money out of worker’s pay – skillsed, productive workers in a weather-controlled industry shouldn’t be paid less so that a few wealthy owners can pocket the difference.

So here is the reality, without the special-interest spin:

The claims by those that have a new theory about “reforming” prevailing wage in MN are motivated by profit, as a look at actual, real-world data proves.  Prevailing wage in MN is working well – from the savings to taxpayers seen on 2010 MNDOT projects to the fact that our Minnesotan neighbors are still able to support their families spending their money locally to ensure community businesses thrive and grow.

Those that claim there are problems with prevailing wage really only have one issue:

They want to pay workers a smaller share of the money.  Proponents of changing Minnesota’s prevailing wage want to drive down pay so they can compete for jobs by undercutting wages paid by responsible contractors interested in the standard of living of Minnesota’s working families..

It’s that simple, and a number of public officials both in Minnesota and the U.S. Congress, both Democrats and Republicans, recognize this. Of course, well-funded lobbyists are always at work trying to tilt the system in favor of the wealthy. The only antidote to the spin is spreading the truth about what’s fair.
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About local49

IUOE Local 49 was formed in 1927. Today we are more than 13,000 men and women in Minnesota, North and South Dakota with contracts for highway/heavy and building contractors, well drillers, equipment repair shops, welding shops, sand and gravel suppliers, counties, municipalities, hospitals, school districts, cemeteries, and more.

Posted on March 8, 2012, in benefits, Jobs, MN politics, myth buster, union and tagged , , , , , . Bookmark the permalink. Leave a comment.

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