When it comes to the cost of public works projects, wages are usually the biggest number on the bottom line.
Those labor costs loom especially large these days for cash-strapped governments building on the public dime. In many states, including Washington and Oregon, construction wages are based not on the low bid but on a formula-based rate known as the prevailing wage. In Washington, the concept is to establish a fair price based on local market conditions in each of the state's 39 counties. The law requires cities and counties (or the companies they hire) to pay prevailing wages on public projects.
But critics say the price-setting mechanism generates project prices that are higher than those paid on non-government work and substantially raises the cost to taxpayers.
Changing the state's decades-old prevailing wage law — by tweaking its price-setting mechanism to boost or diminish wages — is among topics being debated this legislative season. For some, the debate presents a microcosm of the economic and political issues playing out on the national stage, including immigration reform and public debt. Others see it as an example of profit-starved businesses trying to squeeze more revenue from the wages of workers emerging from a recession that left them with little clout in the workplace.
Did you know?
• Project leaders of the Columbia River Crossing estimate 1,900 jobs per year — many of them that would be paid at state prevailing wage rates — will be created over the life of the six-year, $3.4 billion project to replace the Interstate 5 Bridge, rebuild freeway interchanges and extend light rail into Vancouver.
• The Oregon State Legislature recently approved $450 million toward the project, money that is contingent on Washington state also pitching in.
• The project also will also depend on tolling and federal funding.
"You have the big corporations who want a higher profit rate," explained Mike Sheehan, a Scappoose, Ore., attorney who has studied and written about prevailing wage law. "A lot of people see this as an opportunity to reduce the wages and benefits the average person is making."
But, argue some, raising the cost of public projects poses a strain on already tight community budgets.
"The sense among people is that the markup is about 30 percent, as a rule of thumb," for prevailing wage projects, said Paul Dennis, president of the nonprofit Camas-Washougal Economic Development Association, which recruits new businesses and advocates for business in the two cities.
Dennis, a former mayor of Camas, admitted he is not a big fan of the prevailing wage law and its effect on the bottom line.
"If a road is built by the public sector versus the private sector, why are we demanding the road cost 30 percent more?" he asked.
But there's plenty of disagreement about whether the prevailing wage law renders project costs higher, if the difference in project quality, design, and life cycle are factored in.
"If the analysis is done, it needs to thoroughly examine identical projects that
are being built using the same criteria," said Todd Horenstein, Vancouver Public Schools' assistant superintendent for facility support services.
He believes the prevailing wage system helps ensure quality workmanship on district projects, being built to last over a 30- to 50-year span. The district began its bond program in 1992 and since then, has invested more than $400 million developing more than 30 projects
"Our primary interest is using the public investment for the highest quality project we can," Horenstein said. "That helps with longevity and maintenance over the life cycle of the project."
Legislators debate wages
Several Washington lawmakers are wading into the long-running debate.
In Olympia, the Legislature is considering several bills to modify the existing prevailing wage law. A couple of the bills, which would loosen prevailing wage requirements in some situations, have passed out of the Republican-controlled Senate and are headed to the House.
Senate Bill 5107, introduced by Sen. Mike Padden, R-Spokane Valley, would lower the prevailing wage rates for contractors conducting site work or constructing parking areas, utilities, streets or sidewalks that are related to a residential project. Under state law, residential prevailing wage rates are already lower than prevailing wage rates for commercial projects.That bill passed out of the Senate with a near party-line vote of 26-23, and it likely faces an uphill battle in the state House of Representatives, which has a Democratic majority.
On the flip side, at least one local state representative wants to extend the prevailing wage requirement. Rep. Jim Moeller, D-Vancouver, introduced the now-stalled House Bill 1025, which would have extended the requirement to include private-sector projects that receive state tax incentives.
Developments that receive state financial support shouldn't be built by contractors who court low-ball bids from companies that pay lower wages and, in some cases, use unskilled laborers, Moeller said. If they choose not to accept the tax incentive, "then they can certainly pay whatever they wish," as long as the wages comply with minimum-wage laws, Moeller said.
Conversely, Sen. Curtis King, R-Yakima, has introduced a bill that aims to change the rules for determining which contractors are eligible for public works projects. Senate Bill 5686 would add a new section to the state's prevailing wage law to prevent contractors from bidding on public works projects unless they've submitted a prevailing wage survey within 60 days of becoming a state-registered construction business. That bill passed out of the Senate with a vote of 27-22 and awaits approval in the House.
Critics of the existing system suspect the rates may be skewed by the surveys, which are voluntarily submitted to the state Department of Labor & Industries by contractors. Those surveys, they argue, come mostly from union-wage shops that pay the very highest of wages.
"Certainly, organized labor takes a great interest in prevailing wages and they will help complete those surveys," said Van Collins, legislative council for the 700-member Associated General Contractors of Washington. The organization represents both union and non-union shops.
L&I conducts its trade surveys every three years to redefine the wage rates being paid in each county. The rate is based on the hourly wage and benefits being paid in each county's largest city for the various construction trades. In all, L&I sets prevailing wages for about 98 trades -- from asbestos abatement workers to well drillers -- at both the higher, journeyman level and at several apprenticeship levels.
"These are skilled jobs in construction," said Elaine Fischer, a spokeswoman for L&I.
Collins said his group also supported another proposal sponsored by King, Senate Bill 5684. The bill, which was passed by the Senate 26-23 and is now being considered by the House, would eliminate requirements that apply prevailing wage rates to off-site laborers, including delivery truck drivers and workers who fabricate materials transported back to a job site where prevailing wages are in effect.
Such extensions, as they are called, don't fit the original intent of state law, the Associated General Contractors' Collins argues.
"(House Bill) 5684 strips a lot of that away and brings it back to the core intent," Collins said.
Law adopted in 1945
Adopted in 1945 as the Washington State Prevailing Wages on Public Works Act, the law's aim is to ensure high-quality public construction projects built by contractors who all pay the same wages. This way, the theory goes, contractors are prevented from hiring less-skilled, cheaper workers and thus, cutting corners.
Proponents say the law does its job.
But critics — including non-union contractors — are determined to rein in prevailing wages, which they say translate to higher costs to build public projects.
"It certainly drives up the cost of construction, from my experience," said Tyler Young, who mainly consults with contractors as a certified public accountant with NW Accounting Professionals LLC in Battle Ground.
He said Washington's prevailing wage law puts non-union contractors at a disadvantage when they submit bids to construct a public project. The employees of non-union construction companies are paid wage rates that are lower by between 50 percent and 100 percent, said Joe Curry, a union contractor and owner of Vancouver-based JWC Construction and Anchor Concrete Inc.
"Basically, the non-union contractors aren't paying benefit packages and health benefits," Curry said.
Others say higher costs for government projects keep citizens safer in public buildings, roads and bridges constructed by skilled journeymen workers and their apprentices.
"If it costs $25 an hour to hire a master welder to do the bridge work, it's just as important as if you're hiring someone to do brain surgery," Sheehan said.