John Bouder, 717-671-1901
Anti-Competitive Prevailing Wage Mandates Cost $1 Billion Annually
Artificial Wage Inflation Harms School Districts, Local Governments, and Taxpayers
Wouldn’t a billion dollars go a long way to closing the budget deficit, funding schools, or lowering property taxes? New research from the Commonwealth Foundation shows simply ending prevailing wage mandates could save taxpayers billions for years to come.
“Instead of raising taxes on middle class families, Governor Wolf should advocate for allowing government to pay market wages—rather than artificially inflated union wages—for construction projects,” commented Bob Dick, a policy analyst for the Commonwealth Foundation. “Taxpayers should not be forced to knowingly overpay for government construction projects. That’s like going to an Apple Store, picking out an iPhone 6 marked at $299, and offering them $350 instead. In the real world, you’d be laughed at.”
When the prevailing wage law was first enacted in 1961, the threshold where the mandate kicks in was set at $25,000—twice the value of an average home. If adjusted for inflation, the threshold would be nearly $200,000 today. But for many projects, the threshold hasn’t changed since the law was enacted more than 50 years ago.
- The Pennsylvania Association of Boroughs compared prevailing wage rates across the commonwealth’s 67 counties and found they exceed market wages by 30 to 75 percent.
- School districts alone spent more than $1.6 billion on construction in 2012. Allowing schools to opt out of the prevailing wage mandate could save taxpayers between $160 and $480 million each year.
- Pennsylvania state and local governments spent nearly $11 billion on construction projects in 2012. Based on wage data, ending prevailing wage—which raises the total cost of construction projects by 10 to 30 percent—would result in a savings of $1 to $3 billion annually.
“In York County’s Southwestern School District, a project to fix a leaking roof was bid out for $84,000. But when prevailing wage mandates took effect, costs ballooned nearly 50 percent to $125,000. This is just one of many local examples of the harms caused by this unnecessary mandate. In fact, a Local Government Commission survey found municipalities rank the prevailing wage as one of the most burdensome mandates in the state.”
Read our latest policy points “Pennsylvania’s Prevailing Wage Law” for more.
Bob Dick and other Commonwealth Foundation experts are available for comment. Please contact me to schedule an interview.
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