Prevailing wage laws, maligned by some as interference with the free market, are in fact critical to the health of our economy, especially in this recession-prone era.
Such laws establish wage and benefit rates for construction workers based on prevailing conditions in the community. They help to assure quality workmanship by attracting qualified workers, and they enhance tax revenues and bolster local businesses through the workers' increased ability to purchase goods and services.
Although prevailing wage laws were originally written to protect workers from being victimized by cutthroat competition among contractors, they also protect taxpayers from having to shoulder the additional burden that uninsured workers place on the public health-care system.
Prevailing wage laws were established in the late 1800s in response to the attempts of unscrupulous contractors to profit at the expense of their workers. By importing workers from depressed areas, employers could slash wages and build projects more cheaply. This served to undercut companies that hired from the better-paid local work force, and it created economic chaos in the local community. As a result, Congress enacted the Davis-Bacon Act in 1931, and the passage of many state prevailing wage laws soon followed.
California's prevailing wage, created by state law, is the single wage rate paid to the greatest number of workers in the locality. Traditionally, prevailing wage laws have applied to public works construction, that is, the building of roads, schools, public buildings and other publicly funded projects. But recently, several communities in Northern California extended prevailing wage requirements to private construction as well. The passage of such ordinances ensures that construction workers will receive the decent wages to which they are entitled and will inject additional revenues into those economies.
But just as important, prevailing wage laws assure adequate access to health care. Employers seeking to cut labor costs do not stop at paying substandard wages. The pervasive problem of inadequate health care facing our society is the direct result of American employers who have refused to provide their workers with health insurance. Prevailing wage laws address this problem by mandating that employers either provide their workers with health insurance benefits or pay them a comparable amount in cash so that the individual workers can purchase health coverage for themselves and their families. This not only gives working people access to health care but also preserves the availability of government-funded health care for the truly indigent.
A 1990 study by the Public Policy Research Institute revealed that in Dade County, Fla., nearly 88% of the uninsured either had jobs themselves or lived in families with employed people. Furthermore, the study found that three out of every four construction workers had no health or life insurance or pension plans.
Critics say prevailing wage laws are bad. But bad for whom? Certainly not for the working people who receive those decent wages. And not for the small businesses that reap the benefits of the increased consumer spending that those wages generate. Nor are such laws bad for our public school system, our local, state and federal governments, or the social service system, all of which benefit from the increased tax revenues.
Who, then, do the prevailing wage laws hurt? Perhaps those employers who are opposed to paying their workers an honest wage for an honest day's work. Detractors suggest that prevailing wage laws are too expensive and that such costs are passed on to taxpayers. However, it is becoming clear that it is more expensive not to provide basic protections to America's workers. Without such protections, we as taxpayers will bear the costs of worker exploitation: reduced consumer spending, diminution of tax revenues and massive public assistance.
Furthermore, should such laws create a groundswell of interest among workers employed in other sectors of our economy as the laws' detractors suggest, then so be it. After all, we must not prevent the free movement of competing forces in our market economy.
Thus, the real issue addressed by the prevailing wage ordinances is whether our nation's most important asset, its working people, should be exploited for the sake of their employers' profit. In the post-Reagan era, most of us have perhaps forgotten a commonly held theory of government that states that the purpose of government is to balance the competing interests in our society. As we have seen, this theory was turned on its ear by such events as the savings and loan crisis and airline deregulation. A host of social and human services once provided by the federal government were also cut so as to induce a healthier business climate. The prevailing wage laws provide at least some assurance to workers and society as a whole that profits are not earned at workers' expense.
Working people are not to blame for America's economic woes. While the average American's earning power has dropped in the last 20 years, the cost of living has increased. The time has come for all of us to examine our collective problems, their causes and solutions. When critics denounce the prevailing wage laws, we must not forget that working people are making an honest contribution to society and should be recognized for their efforts. Our challenge is to maintain employers' profits without ignoring the needs of the rest of our society. Prevailing wage laws provide a real solution.