A top-down government-imposed mandate is costing billions of dollars a year in wasted tax dollars and lost opportunities for workers while disproportionately harming minorities. It’s called “prevailing wage,” and if you don’t work in the construction industry, you probably haven’t even heard of it.
Prevailing wage laws at the federal, state, and local level, which require private contractors who bid on public-works projects to follow complicated, ever-changing compensation schedules produced by the federal Department of Labor, are often portrayed as measures to ensure fair wages for construction workers. That was the narrative behind the Biden administration’s misguided attempt to significantly expand the reach of the federal prevailing wage law—until a court struck down the administration’s last month as unlawful.
Here’s what these laws’ proponents don’t tell you: nearly a century of data reveals these mandates hurt the very people they’re supposed to help. Fortunately, defeating these misguided regulations isn’t just possible—it’s a much-needed step in the fight for economic liberty and government accountability.
That’s why it was such welcome news when an Arizona court last month struck down recently enacted prevailing wage ordinances in Phoenix and Tucson. The decision came after the Goldwater Institute, where I work, sued Phoenix and Tucson on behalf of dozens of area businesses, and it held that these ordinances were illegal under a state law that prohibits cities and towns from saddling public-works contractors with “prevailing wage” requirements.
Paying workers fair wages isn’t the problem: In fact, construction workers today are earning more than ever before, with construction wages rising nationwide at rates that outpace the entire private-sector average. Instead, under the guise of benefitting workers, these wrongheaded mandates hurt workers and business owners alike by smuggling in bureaucratic red tape, compliance costs, and stiff penalties (including heavy fines, legal fees, and even prison sentences) for violations.
All this benefits politically entrenched labor unions by eliminating their competition.
But, as decades of data show, prevailing wage laws hurt everyone else. They’re notoriously difficult to implement in the field, forcing contractors to painstakingly track and classify employees’ tasks (for example, paying a general laborer as a “carpenter” if he happens to hammer a nail that day). They hurt employees, particularly entry-level ones, by making it punitively expensive and complicated to hire workers. The brunt of it falls disproportionatelyon minorities, immigrants, younger workers, women, veterans, and small businesses. And they cost taxpayers more by excluding qualified businesses from competing for public-works contracts and driving up costs (not only payrolls, but compliance costs) for those that remain.
In fact, striking down Phoenix’s prevailing wage law will save taxpayers nearly $100 million, based on the city’s own estimates. It will also ensure a level playing field for all workers and businesses, particularly those who can’t afford to pay the higher compliance costs or navigate the bureaucracy that this mandate would have created.
The fight is far from over: dozens of states and localities still have prevailing-wage measures on the books, despite a mountain of research and experience exposing their true effects. Meanwhile, federal bureaucrats are now tryingto embed another “prevailing wage” mandate into so-called “clean energy” projects.
But our victory in Arizona shows a path forward.
Bloated government, wasteful spending, and stifling bureaucracy are not inevitable. There is a better way for taxpayers, business owners, and workers alike—if we’re just willing to fight for it.
John Thorpe is a Staff Attorney at the Goldwater Institute.
