Legislative Research Commission Prevailing Wage Report

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Key points of interest

  • interviews were held with Labor Cabinet officials, union representatives, contractors, local government officials, and school officials and opinion surveys were administered
  • great disagreement among interested parties regarding effects of the law
  • neither wages set by the Kentucky Labor Cabinet nor the US Department of Labor yielded prevailing wages representative of local wages
  • substantial evidence that prevailing wage laws do increase the initial costs of construction
  • unclear whether requirements result in higher quality construction
  • to extent quality is increased, prevailing wages are an inefficient method to increase quality
  • determination process used by the Kentucky Labor Cabinet is more likely to yield prevailing wages that are representative of union wages
  • union workers account for approximately 21% of non-residential construction workers, 81% of the workers for which wages were submitted at prevailing wage hearings were union members
  • use of the majority wage for defining the prevailing wage tends to favor union wages, because unions typically negotiate a single wage for each classification of worker
  • prevailing wage laws constrain contractors from hiring lower-wage workers
  • when faced with paying higher wages, contractors will attempt to shift from using low skilled labor to more productive labor or increase the use of equipment
  • a survey on 46 recent projects calculated the wage portion of the construction costs on these projects increased by 24%

Recommendations contained in the report

  • replace data collection through hearings with a data collection process that provides better coverage of all construction workers in the area - like survey of contractors doing commercial construction
  • Labor Cabinet follow-up with contractors that did not respond to the initial request for wage data
  • use of the majority wage should be discontinued
  • wages paid to workers on previous prevailing wage projects should be excluded from the determinations for later projects
  • current definitions of localities should be replaced with definitions that would reduce the number of unrelated counties grouped together
  • if no changes are made to make Kentucky's determination process more representative of local wages, then federal prevailing wages should be adopted wherever they exist; if the accuracy of Kentucky's determination process can be improved, then use of the federal prevailing wages should cease entirely and be replaced by the improved state determinations
  • Kentucky Labor Cabinet should develop a process to validate evidence submitted for prevailing wage determinations to reduce cases of invalid or suspect data

Recommendations in the report have resulted in the following changes to improve the wage determination process since 2001.