Does the Prevailing Wage Rate Really Prevail?

May 28, 2008

According the 2007 U.S. Department of Labor Statistics, West Virginia workers make on average $7,932 less per year than the surrounding states workers and $8,380 less in comparison nationally.  And to add insult to injury, you can double these numbers to calculate average lost household earnings which equate to $15,864 and $16,769 respectively.  If we are paying workers the higher prevailing wage rates on government funded projects, why are the average wages of West Virginia workers significantly below that of other states? (See the chart below)

Huge amounts of taxpayers’ dollars are wasted each year due to the West Virginia prevailing wage rates and a conservative expenditure estimate would be around $300 million.  West Virginia laws currently require paying workers this artificially higher rate when they are working on any project funded with state tax dollars, and this also includes counties and cities.  The West Virginia prevailing wage rates make building roads, bridges, schools, water and sewer lines and virtually any other government funded project far more expensive as compared to the cost of the same project built in the private sector and many other states. 

Let’s not mince words here; the proponents of the prevailing wage scheme are the labor unions.  Labor Unions make up about fifteen percent of the West Virginia workforce and we should keep in mind that many of their members are not necessarily labor activist but rather they are forced into membership because of union shops, which are where anyone can be hired, but after a certain period of time must join a union in order to retain their employment. 

Mandatory membership dues are assessed on each worker and then a portion of these dues are used to generously bankroll predominantly Democrat candidates who favor the continuation of the prevailing wage system, which basically perpetuates the unspoken contract of “I’ll scratch your back if you’ll scratch mine.”  If you don’t believe me, take a few minutes and check out the campaign finance reports on the Secretary of States’ website.  www.WVSOS.com  

Here’s a dirty little secret: Over fifty-five percent of those who receive the artificially high prevailing wage rate, on West Virginia projects, funded with West Virginia tax dollars, are out of state workers.  That’s right, they don’t live in West Virginia, they don’t pay West Virginia taxes and they don’t contribute to West Virginia’s economy.  Would it not make sense to redirect these tax dollars to increase teacher and state employee salaries, thus getting more bangs for the buck?

Here’s an even better approach.  Start by eliminating the prevailing wage, then take $150 million of the savings to increase teacher and state employee salaries, then take the remaining $150 million to reduce business taxes by immediately eliminating the business franchise tax, reducing the corporate net down to just below the national average, truly eliminate the inventory tax and eliminate the personal property tax on equipment and machinery.

By incorporating these tax reforms along with further tort reforms, West Virginia would become a tremendous economic magnet that would attract job creating industries.  As businesses expanded or located to West Virginia, demand for the West Virginia worker would increase.  The more demand for workers, the higher their wages, and the higher their wages the greater the tax revenues. 

West Virginia has been spiraling down for decades in comparison to our surrounding states, as well as nationally.  It’s about time that we took our destiny into our own hands and institute the basic fundamentals of economics to allow us to spiral up into prosperity.

I would argue that the prevailing wage only benefits the smallest percentage of the West Virginia workforce while the remainder of our underpaid workers and retirees is overtaxed to pay for this select, well connected group.  

I welcome all comments as long as your home was constructed using prevailing wage rates…