Enacted in 1931, the federal Davis-Bacon Act established the concept that a community prevailing wage should be paid on government-funded construction projects. Its purpose is to give all contractors equal opportunity to bid and win government contracts, and to ensure that the government will not undermine working conditions and wages that are prevalent in a particular region.
The Davis-Bacon Act and state Prevailing Wage Laws have been a bulwark of the construction industry and a great economic resource. They have resulted in decent wages, benefits, and a better standard of living for construction workers and local communities. They also benefit taxpayers by encouraging higher standards of safety, professionalism and productivity on the job-site, and by reducing government welfare expenditures. When prevailing wage laws are properly enforced employers and their employees are taxed on the full wages they pay and receive, creating additional tax revenues.
Despite the broad public benefits it generates, there seems to be a lack of understanding and indifference towards the prevailing wage law among many local and state agencies. Their failure to effectively monitor the projects they bid and award allows unscrupulous contractors to construct an inferior product and skirt their tax obligations. This leads to higher repair and maintenance costs and reduces the tax base of their communities, forcing local residents to pay higher taxes.
Quick Facts about Prevailing Wages
- Since 1913, New Jersey law has required contractors to pay workers on public building projects no less than the compensation that prevails on similar projects in their geographic area. The law applies to state government, all levels of local government, and every instrumentality or agency of the state or any of its political subdivisions.
- Every public body is required to receive a determination from the Dept. of Labor on the specific prevailing wage rates to be paid to each trade on every project it bids. Also, the project contract is required to stipulate the applicable wage rates for workers on the jobsite.
- The Prevailing Wage Law encourages the provision of health care and pension benefits to all workers, union and non-union alike, and the enforcement of state and local tax laws, thereby promoting both tax fairness and the collection of appropriate government revenues.
- School construction projects paying prevailing wages have a higher employment multiplier effect than jobs paying less than prevailing wages. One study indicates that every 1000 New Jersey school construction jobs that receive prevailing wages will lead to 566 other jobs.
- Prevailing Wage laws level the playing field for all contractors. By standardizing wage rates, productivity and fair profit margins become the key components to successfully bidding public work.