Op-Ed: Intensely Lobbied Prevailing Wage Debate

As Albany closes out the legislative session, some of the toughest remaining issues involve reconciling the different needs of the state’s diverse regions. One example is whether and how to extend residential rent regulations state-wide. Another, less well understood, is the debate over imposition of prevailing wage requirements for construction work on state-assisted, private development and renovation projects. (Prevailing wage typically reflects the wage established in collective bargaining agreements between the building trade unions and the industry.)

The impetus for expanding prevailing wage requirements comes from Upstate, where chronically weak economic conditions mean a lot of construction union members are out of work or under-employed. In many Upstate regions, construction workers are unlikely to command a “prevailing” wage unless the government requires it.

The same is not true in New York City and other Downstate regions, where union-built, private construction is booming, and Building Trades members enjoy full employment. In fact, right now there is a shortage of more than 4300 skilled workers to fill available construction jobs in the five boroughs.  As a result, construction wages are already at a premium, without the need for any state mandate.

The challenge Downstate is not a shortage of jobs for union construction workers or the need to prop up union wages, but rather how to expand the supply of well-capitalized contractors and build a larger, highly skilled workforce that can meet the demand for renewal and expansion of our urban built environment.

A key benefit of many state programs is that they support a pipeline of private construction activity that is accessible to smaller, non-union contractors and workers drawn from the local community. This is precisely because they do NOT require prevailing wage and contractors that are party to industry collective bargaining agreements.

Grants and tax incentives provided through the state Housing Trust Fund, Regional Economic Development Council initiatives, the State Council on the Arts, NYSERDA, Empire State Development and other state agencies are largely directed into disadvantaged areas of the city and to nonprofit organizations. These state grants, loans or tax incentives represent a small portion of total funding for most projects. But they are necessary to close a gap and allow a project to move forward.

Importantly, these state-assisted, private and nonprofit projects offer local firms and workers, many of them minorities, a foothold in the construction industry that does not otherwise exist in the city, where barriers to entry are high. The construction activity they make possible is of little or no interest to the unionized industry, which has more than enough work to do on larger, more lucrative projects and has a high cost structure that would not allow them to bid competitively for this type of work.

In the prevailing wage debate, unions have proposed that any private construction or renovation activity that the state touches be declared a “public work,” comparable to subways, highways, schools and other public facilities. This would mean that projects that receive a modest government grant or tax incentive would be subject to the same rigorous compliance requirements as 100% government funded contracts. It is clear that the consequences would be far fewer projects built and displacement of many of the nonunion contractors and workers who are currently getting these jobs.

To address needs of Upstate, where unemployed construction workers don’t have much leverage, it might make sense to apply prevailing wage to those projects where the majority of direct funding (exclusive of tax incentives and tax-exempt bond financing) is coming from government. Studies show that this would increase project costs by as much as 30%, but it may represent a fair way to respond to concerns from some regions of the state where there is little private construction activity.

At the same time, the legislature should reject the imposition of public works status on the types of projects funded through its myriad housing, economic development and community facilities programs that involve a mix of public, private and philanthropic funds. Instead, there should be a concerted effort to integrate these programs with workforce development, training and Minority and Women Owned business development initiatives, doubling down on the creation of opportunities to expand and diversify the construction industry to meet demands in regions that are experiencing rapid growth.

At the end of a legislative session that has tackled many difficult issues, it must be tempting for legislators to just pass an intensely lobbied bill like expansion of prevailing wage and go home for the summer. Hopefully, that will not be the case, Albany will take the time to carefully consider regional needs, and act accordingly.