Taxpayers don't prevail
Nevada's prevailing wage law benefits narrow groups at public expense
- Monday, November 12, 2012
Imagine you're a plumber living in Mesquite.
For most jobs, you'd probably earn as much as a plumber living in nearby St. George, Utah — $19.67 per hour, on average, according to data from the U.S. Department of Labor.
If you can get work on a public works project financed by Clark County or the State of Nevada in your hometown, however, your employer would be required to pay you at least $70.78 per hour. That's about three-and-a-half times what you'd likely make on a typical job.
Why such a large difference?
Like several other states, Nevada has a peculiar law that requires contractors who win contracts for publicly financed construction projects to pay workers according to a strict wage schedule established by the state's labor commissioner. This wage schedule is determined through a process that, ostensibly, is designed to ensure that public entities pay wages reflective of the local marketplace.
As the above wage disparity makes clear, however, there are serious flaws with the labor commissioner's methodology.
The labor commissioner begins by asking all contractors within the state to complete a survey indicating how many workers they employ across a number of job classifications — plumbers, electricians, roofers, etc. — and how much they pay workers in each of these positions.
The survey, though, is designed in such a way that only contractors employing high-priced union labor are likely to fill out the forms. For contractors employing non-union labor, filling out the forms would create onerous new accounting burdens.
That's because the various job classifications are strictly defined, reflecting union rules. It's also because the value of fringe benefits must be reported on an hourly basis. Few employers of non-union labor go through the accounting exercise of valuing fringe benefits by hour worked, since each employee has likely chosen a unique package of insurance coverage, retirement contributions and other perks.
For union shops, on the other hand, it's easy to value these perks on an hourly basis because every employee receives a uniform benefits package through his or her collective bargaining agreement.
Even after the labor commissioner's survey has systematically excluded most non-union contractors, his method further ensures that the schedule of mandatory wages for publicly financed projects — called "prevailing wages" — is really a reflection of union wage schedules instead of actual wages found in the local marketplace. If more than half of the survey responses within a particular county are from union employers, then the non-union responses are dismissed entirely and the union rate becomes the state-mandated "prevailing wage" rate.
As a result, workers in the building trades often earn substantially more when taxpayers foot the bill than when private firms or individuals do.
Another interesting perk built into the prevailing-wage schedule is the premium that tradesmen receive for working on projects in remote areas. The prevailing-wage rate increases when a project's location is more than a given distance from a union hall or county office building. That, in part, is why a plumber makes at least $70.78 per hour for working on a public project in Mesquite — he receives an extra $11.25 per hour because the project is more than 76 miles from the Clark County Regional Justice Center in Las Vegas.
It's unclear why a plumber who lives in Mesquite should receive such a high premium for working in his hometown. Nevada's prevailing wage law, after all, purportedly is supposed to ensure that workers receive wages in line with the local marketplace. For plumbers in Mesquite, that's somewhere around $19.67 per hour.
Similar comparisons could be drawn with other occupations. An unskilled laborer in Clark County must be paid at least $45.29 per hour, with an additional $3.25 if a project is more than 50 miles from Las Vegas City Hall, for instance. That's significantly more than the Las Vegas average of $20.02 or the St. George-area average of $12.37 per hour.
While these figures are lucrative for construction workers who work on publicly financed projects, they mean that taxpayers get much less value for their money than they do as private citizens. Without prevailing wage requirements, taxpayers' limited resources could be stretched farther — creating more value for society and more jobs for construction workers.
A recent analysis by the Nevada Policy Research Institute estimated that prevailing wage requirements cost Nevada taxpayers nearly $1 billion extra over 2009 and 2010.
That's why prevailing wage reform needs to be at the top of the agenda for the Nevada Legislature in 2013.
Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute. For more visit http://npri.org. This article first appeared in the November 2012 edition of Nevada Business.
