Prevailing Wage: Higher Taxes & Fewer Projects

A new report by the Empire Center confirms what many have believed for years – New York State’s prevailing wage law drives up construction costs as much as 25 percent, squandering precious tax dollars in the process.

In Prevailing Waste: New York’s Costly Public Works Pay Mandate, authors E.J. McMahon and Kent Gardner detail how the state’s current prevailing wage law increases the cost of public construction projects by mandating contractors pay their workers’ wages set by union collective bargaining agreements.  At the heart of the increase cost is the fact that the mandated pay includes expensive union fringe benefits which in many cases approach or exceed the workers’ hourly pay rate.

As a result, the report outlines how the prevailing wage law increases construction costs by 13 to 25 percent depending on the region of New York.  In the Buffalo area, the authors estimate prevailing wage increases construction costs by 20 percent.  These inflated project costs mean two things – fewer projects and higher taxes, and in the process help cement New York’s deserved reputation as one of the highest taxed and noncompetitive places to live and own a business.

Prevailing Waste also explores how the state’s prevailing wage law works as a taxpayer funded subsidy to prop-up the pension funds of the construction unions.  McMahon and Gardner report prevailing wage helps to sustain the union’s underfunded defined benefit pension plans.   According to their research, the authors explain how these pension plans have less than half of the money needed to cover the benefits promised to union members.

Despite the startling conclusions outlined in Prevailing Waste, some state lawmakers want to expand the prevailing wage mandate.  Specifically, efforts are underway to mandate prevailing wage on private projects that receive some form of public support from local Industrial Development Agencies or other economic development entities.  Read why we oppose this legislation.  Beating back this legislation and similar proposals will be a primary focus of the Partnership and our allies for the remaining weeks of the state legislative session.

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About Grant Loomis

Vice President, Government Affairs