Download a copy of The Prevailing Wage here.

“Prevailing Wage” law means more potholes, more dangerous bridges, and less economic growth

“Do more with less.” It’s a good idea anytime and a necessity in hard economic times. Unless you’re the government. Both the federal and Washington state governments—by law—do less with more when it comes to building and repairing infrastructure.

The “do less with more” law is actually called “prevailing wage” or Davis-Bacon, after the two sponsors of the federal bill in 1931. Originally, Davis-Bacon was designed to keep minority workers from “taking” white jobs by underbidding established contractors for public works projects. Washington state enacted prevailing wage in 1945; the law applies to state-funded public works projects. Thirty-two states have some form of prevailing wage law.

Davis-Bacon and state prevailing wage laws establish artificial floors for wages paid by government contractors. Essentially the laws create a multitude of minimum wages for different kinds of construction work in different regions. The wages are supposed to reflect the ordinary (i.e. “prevailing”) wage in the locale. At both the federal and state level, the prevailing wage is determined using unscientific surveys of businesses and unions. In the end, government bureaucrats establish wage floors that reduce competition for government projects and grossly inflate the costs to taxpayers.

A new Freedom Foundation study shows that in the Olympia area, Washington’s prevailing wage law requires contractors to pay construction equipment operators at least $49.46 per hour. Yet the Bureau of Labor Statistics (BLS), which calculates actual market wages, finds that the market price for the same work in the same area is $22.01 per hour.

In Spokane, a roofer working on a state-taxpayer-funded project must be paid at least $32.88 per hour. Do the same work there in the private sector and the average wage is $16.77 per hour.

In Kitsap County, a construction laborer in the private sector makes about $16.72 per hour. Work for state taxpayers, however, and the same laborer will get $32.44 per hour. In each of these cases, taxpayers are forced to pay nearly twice the actual labor costs. To put it another way, taxpayers are getting a lot less than what we’re paying for.

One way to understand prevailing wage laws is to think about monopolies and other kinds of price fixing. Generally, those things are illegal. When one company controls the marketplace, or when companies get together and create a cartel, consumers lose the power to choose. They pay more and get less.

Monopolies and price fixing are illegal—except where government creates an exception. In the case of prevailing wage laws, government not only creates an exception, but mandates price-fixing. Prevailing wage laws do exactly the same thing as any cartel—they stop competition in order to raise prices on consumers, in this case, on taxpayers.

A few workers benefit. Their unions benefit. The politicians supported by these workers and unions benefit. But almost everybody loses. Taxpayers are bilked, and every user of government infrastructure, from school kids to truck drivers, loses out too. Prevailing wage laws are a classic example of special interest legislation, where the benefits go to a tiny but vocal group and the costs are spread out so much that most losers don’t even realize they’re being abused.

Since 1945, Washington legislators have decided to fill in fewer potholes, retrofit fewer bridges, and build fewer new schools in order to benefit a small special interest with our state prevailing wage law. Repealing this law is one of the easiest ways legislators could show respect for state taxpayers, seriousness about the budget, and an interest in reviving Washington’s economy.

Download a copy of the full study here.