Herron: Prevailing wage debacle

By Mason Herron / Columnist

published: Wed, 18 Nov, 2009

The Pittsburgh City Council introduced legislation on Tuesday that would “require contractors who provide building and food services to the City of Pittsburgh to pay prevailing wages to employees.” This legislation, if passed, would increase governmental costs and unemployment while reducing the amount of much-needed development in Pittsburgh.

According to the proposed legislation, developers who wish to do business with the city must pay their employees with wages, benefits and time off that are equal to or greater than the average offered within Pittsburgh.

In addition, building service, food service, hotel and grocery employees must be paid the prevailing wage “for all work performed on or related to projects that are receiving or have received” a subsidy from the city. According to the Pittsburgh Post-Gazette, earlier this year council president Doug Shields said, “whether they’re owners or tenants, those businesses should have to pay their workers enough money so they’re not eligible for food stamps or the state’s Child Health Insurance Program.”

Proponents of this legislation argue that the measure would bring fairness to the labor market and invigorate the Pittsburgh economy with increased wages. This belief, however, is shortsighted and imprudent.

Much like minimum wages laws, so-called “prevailing wage” laws, such as the Davis-Bacon Act of 1931, have a detrimental effect on employment.

Imagine, for example, a young Oakland resident whose skills are valued at $10 per hour. In this scenario, a developer building a park would be pleased to employ our Oakland resident, who is more than happy to accept the $10-per-hour wage rather than face unemployment. However, if the average wage within the city is $30 per hour for the same type of work, then this developer will not hire our Oakland dweller, who will then be unemployed.

Furthermore, this would increase costs for a city government that already faces a budget shortfall. Often when the city wishes to build a park, bridge or any other public good, they must pay a private developer to do so.

Ideally, the city would pay the developer that offers the cheapest service. Yet, if the city forces all developers to raise wages to meet new standards, then operating costs will also increase. The city will then have to foot the bill and will essentially subsidize the wage difference between the lower market-determined price and the higher wage required by the prevailing-wage legislation.

The cost increases would not stop there. Each employer must prepare a record for the city detailing “the name, address, job classification, wages and benefits paid or provided and number of hours worked for each employee.”

Additionally, employers must “file a statement each week with the Controller or the Controller’s authorized agent certifying that all workers have been paid no less than required by contract.” This increase in gross-tonnage of paperwork will undoubtedly increase administrative and bureaucratic costs for a city already unable to handle its current financial load.

Meanwhile, developers will be far more reluctant to do business in a city that would impose such onerous regulations that tie wages to subsidies. Pittsburgh, after all, is not geographically expansive. Businesses that wish to develop need merely to travel the short distance to Pittsburgh’s suburbs outside of the city’s jurisdiction where they may conduct business with local governments that do not dictate wages to developers.

The cons of this legislation far outweigh the pros. One wonders, “Why was it proposed?”

United Northside — an interest group representing Pittsburgh’s Northside — was “seeking “prevailing-wage” standards that would set minimum wages and benefits based on averages for certain types of jobs,” according to the Pittsburgh City Paper. At that time, the organization “already started discussing proposals with council members, including council president Doug Shields.” Moreover, the Post-Gazette reports, “The legislation is backed by several local unions that are expected to speak out on its behalf.”

This legislation is the worst kind of liberalism, and it reeks of interest-group politics as opposed to reform politics. The latter aims to elevate society as a whole, not just a particular segment that carries influence over votes.

The city would be better off without this legislation, and many of our lowest-skilled workers would have access to jobs from which they would otherwise be shut out.

E-mail Mason at mph20@pitt.edu.