State the Issues - May 2003

State the Issues

by Danny L. Thompson, Warren Hardy

ISSUE: "Is Nevada’s system for determining prevailing wage rates fair to contractors and to the public?"

By: Danny L. Thompson

Workers in Nevada have been working under the prevailing wage law for more than 66 years, and for all these years it has proven to be a very important component in public works construction projects. Prevailing wage laws were originally enacted nationally in the 1930s to prevent transient low-wage workers from coming in to an area and taking work away from local craftsmen.

States that have eliminated their prevailing wage laws have seen qualified local workers leave. As a result, the quality of the workmanship suffers, resulting in cost overruns, time delays and shoddy work.

Because local governments cannot negotiate their bids, the prevailing wage law ensures the quality of work is maintained. Contractors pay the same wage, leveling the playing field, because they hire more qualified workers and not low-wage, unskilled or unqualified workers. Contractors’ bids are based on the efficiency of their businesses, rather than on how much they can take away from their employees.

In Nevada, the prevailing wage is established by the Labor Commissioner. Surveys are sent out yearly to contractors who do public works construction. The commissioner uses the data to calculate the rate that is most prevalent in the county. That rate is maintained as the prevailing wage for that year.

If a contractor contests the established wage, a hearing is held to determine the wage. Copies of payroll records would be examined at this hearing and a ruling is made by the Labor Commissioner on the facts presented. The state surveys commercial and industrial construction in the calculation of the prevailing wage. Some contractors choose not to participate because they are residential contractors that are not counted in the survey. Others don’t want to expose their payroll records. Union contractors have nothing to hide, because their pay rates are negotiated and well known in the industry.

This law has ensured a level playing field for contractors who bid on public works construction, for workers who construct them and to protect the taxpayers’ investment by providing the most qualified workers. This is a good law and should not be changed.

By: Warren Hardy

Your question strikes with considerable accuracy at what is, in my opinion, the most compelling issue surrounding the prevailing wage debate in our state. That is, is the system for determining prevailing wage broken? It is not my position that we should do away with prevailing wage. It is my position that the system for determining prevailing wage is broken.

In answer to the first part of your question, prevailing wage laws are not necessarily unfair to the contractor because they treat all contractors the same. All contractors, union and open shop, are required to pay prevailing wage. As a result, all use the same wage rate when preparing bids for public works projects. The true, monumental unfairness is to the taxpayer.

Under Nevada’s current application, a wage is determined to prevail if the exact wage is used by 40 percent or more of contractors, as reported on the state-sponsored wage survey. The problem is that the only way to achieve this kind of unanimity is to have a third party coordinate the filing of these wage applications, as the unions do. Additionally, because the survey is a voluntary process, respondents need not report all wages. They can selectively report only wages paid on prevailing-wage jobs, which is often the case. Even if the unions do report all wages, they are submitting a collectively bargained wage.

The net effect of the current method is twofold. Because they have virtually no chance at impacting the wage, open-shop contractors do not bother to submit the wage survey. As a result, the reporting of only prevailing wages or collectively bargained wages creates a circular calculation process that guarantees the prevailing wage will never go down. All of this results in the cost of labor on public works jobs being a documented 40 percent higher than the cost of labor on private sector work.

The answer is very simple. We should require that the labor commissioner determine an average of all wages reported in a specific class and declare that wage prevailing. This simple change would save the taxpayers millions in public works projects every year.

Danny L. Thompson, Warren Hardy
Danny L. Thompson is the executive secretary treasurer of the Nevada State AFL-CIO. Warren Hardy represents Senate District 12 in the Nevada Legislature. He is also the president of Associated Builders and Contractors, Inc. (ABC), an association for non-union contractors.