Established to level the playing field in New York public works construction, the NYS prevailing wage law has recently come under fire, because it is believed to drive construction costs upward.
What is the NYS Prevailing Wage Law?
The NYS prevailing wage law — which requires all contractors on state and local government projects to match the hourly compensation levels of union collective bargaining agreements — has had some unintended, negative consequences for contractors.
The Shortcomings of the Prevailing Wage Law
The NYS prevailing wage law may increase construction costs by 13 to 25 percent, according to the advocacy coalition Unshackle Upstate.
A recent report by non-partisan think tank The Empire Center for Public Policy found that more than half of this increase was driven by supplemental benefits, like pension fund contributions and health care coverage. The inclusion of fringe benefits in its definition of “wage” provides a taxpayer bailout of underfunded union pension and retiree health care plans, according to The Empire Center.
The NYS prevailing wage law generally caused hourly compensation to rise by double the 17 percent inflation rate over the last decade, the Empire Center reported found. However, workers pay did not rise at a comparative rate during the same time period.
Prevailing Wage Law by the Numbers
Advocates contend that the prevailing wage law has increased public construction costs much higher than private-sector projects. The Empire Center estimates that total construction costs have increased significantly in these five New York regions:
- Albany-Schenectady-Troy area: 13 percent
- Rochester and Syracuse Metro areas: 14 percent
- Dutchess-Putnam County area: 15 percent
- Long Island and Buffalo Metro area: 20 percent
- New York City Region: 25 percent
Billions of Dollars in Excess Costs
These percentage increases could add up to billions of dollars in excess costs over the next several years, according The Empire Center. “This, in turn, translates into both fewer projects and higher taxes, increasing the challenge of making the Empire State a more affordable, attractive and competitive place to live, work and do business,” wrote E.J. McMahon and Kent Gardner.
The Empire Center argues that a large portion of New York’s public works spending since 2007 has gone to an unintended place.
McMahon concluded in his report, “Rising benefit costs have consumed taxpayer dollars that might otherwise have been spent on bigger pay hikes for construction workers—and on additional public buildings, roads, bridges, transit facilities and other infrastructure projects.”