Prevailing Wage Debate
Speaking off the record, local developers do not hesitate to question the high cost of construction labor in metropolitan Kansas City. More than a few will tell you that wages here are somewhat higher than in comparable markets especially in the south and west and that these higher costs may impede dev-elopment in the area. One source of the higher cost, in their estimation, is Missouri's much misunderstood "prevailing wage" law.
In a nutshell, the Missouri law mandates that all construction work commissioned by any public entity meet or surpass the "prevailing hourly rate of wages in the locality." The problem is that laws are never pro-mulgated in nutshells. This law, in fact, runs to about 14,000 words, the equivalent of a 40-page book. The book is written and rewritten by the Department of Labor and Industrial Relations, which also sets the annual local wage rates, no small task in itself, and monitors compliance.
These laws, however complex, do serve a purpose. Prevailing wage defenders--most notably unions, many of the shops that employ them, and a wide range of political figures--argue that they make the state more prosperous and more productive.
As they see it, states that have prevailing wage laws, like Missouri, also have more apprenticeship training, safer workplaces, higher worker productivity and incomes, as well as more construction workers with pensions and health insurance coverage.
The arguments of the defenders and critics of the law are not necessarily contradictory. The statistics that each side proffers in its defense are hard to take at face value. Too many variables cloud the data and too much implicit advocacy skews the results. In reality, this is not so much a debate about numbers as it is about philosophy. And to understand the philosophy, it pays to understand the history.
Politics inevitably drives much of it. The fact that Kansas was the first state in the nation to adopt a prevailing wage law--and one of the first to repeal it a century later--speaks to the political exigencies of each era.
In 1891 Samuel Gompers came to Topeka. Gompers was the president of the American Federation of Labor back when "AFL" meant something other than "American Football League." Under Gomper's ten-ure, the AFL positioned itself as a conservative labor move-ment, one willing to work with corporate America and existing political parties. Gompers was on the outs with the more radical unions that were then attempting to form their own populist political party.
Although Gompers took the position that unions should be nonpartisan, he was largely in sync with the prevailing sentiments of Kansas Republicans. In March 1891, with inspiration from Gompers, the Kansas senate passed legislation on an eight-hour day that included a section on prevailing wages, to wit:
That not less than the current rate of per diem wages in the locality where the work is performed shall be paid to laborers, workmen, mechanics and other persons so employed by or on behalf of the state of Kansas.
Other states followed in time, but slowly and selectively. The prevailing wage movement got a boost with the Depression and the ensuing Davis-Bacon Act of 1931, which was designed to prevent the federal government from reducing local area construction wages. This act, in turn, spawned any number of "mini Davis-Bacons," state-level legislation that prevented local gov- ernments from undercutting pre- vailing wages in construction projects.
The movement away from prevailing wage began in 1979 when Florida repealed its Davis-Bacon legislation. Alabama followed in 1980. Utah, Arizona, Idaho, and Colorado followed soon after. Kansas repealed its law in 1987. Although the states that repealed the legislation would seem to have prospered, many sundry studies sug- gest that they prospered in spite of the repeal not because of it.
Finally, no study answers the critical question, and that is whether the state or the market should determine the course of events in a local economy. This is a philosophical question, not a statistical one. A recent case out of Springfield, Missouri reveals what transpires when the philosophical camps collide.
As it happens, the Friends of the Zoo in Springfield took bids for a new reptile house at the Springfield Zoo. This private not-for-profit group planned eventually to donate the building to the City, which owns the zoo. The bid invitation, however, made no reference to the prevailing wage.
The Missouri Department of Labor requested that the Friends withdraw the solicitation. Surprisingly stubborn, the Friends issued a new solicitation, this time telling bidders they would not have to pay the prevailing wage. Arguing that the Zoo was public property, the Department filed suit. After much time and expense, the Missouri Court of Appeal ruled for the Friends of the Zoo, claiming that no public funds were to be used for the project.
Implicit in this case are the hidden costs of the prevailing wage. Although there is no denying the law's material benefits to workers, the execution of this law--like all laws--inevitably means more regulation, more litigation, and more government. Any study that ignores this variable is as incomplete as a study that ignores the increase in worker security and prosperity. This is a debate that needs to take place--please see the Industry Outlook to verify--but sheer numbers will not settle it.