In contrast to what the article says, the prevailing wage is not simply a wage equal to what the private sector average is – if that were the case, there would be no reason for a prevailing wage law, the city would have to pay that to attract workers. Rather, prevailing wage are artificially manipulated to pay higher-than-market wages, usually to the benefit of union firms, who would otherwise be non-competitive on government projects. Indeed, instead of paying average wages prevailing wage laws set wages around 40% higher than the private-sector average, driving up costs to taxpayers, as well as harming minorities.
As Jake Haulk writes in the latest piece from the Allegheny Institute on the prevailing wage proposal:
Prevailing wages are marketplace interference of the worst kind. They are basically a tax on affected businesses. By forcing businesses to pay a higher wage than the market requires does two things: it reduces the number of employees businesses will hire or reduces the company’s bottom line-perhaps even making profitability impossible. Neither is in the City’s long term interests ….
In a certain sense one could argue that businesses that take City subsidies deserve to be told what wages they have to pay. After all, if you voluntarily invest in the City knowing the situation with regard to taxes, regulations, labor climate and political leanings of the government, then you only have yourself to blame when the government decides to change the rules and make unreasonable demands on you.
Nevertheless, passing the prevailing wage bill as envisioned by unions and Council will be a long term disaster for the City. While the law might boost income for a few workers in the short term, it will serve to reinforce the long held view by the business community-locally, nationally and perhaps globally-that Pittsburgh’s government and political powers have no regard for the free market and no regard for businesses that have cast their lot in the City.