PWage_Final_ExecSmry

Prevailing wage laws are intended to ensure wages commonly paid to construction workers in a particular region will be the minimum wage paid to the same types of workers on public construction projects. Many prevailing wage laws, including Connecticut's, were adopted in the 1930s when there was concern that low bid requirements for government funded projects would drive down the wages paid to construction workers on those projects.

The federal law, known as the Davis-Bacon Act, applies to projects costing more than $2,000. The Connecticut law applies to state and municipal public works projects of $100,000 or more for renovation work and $400,000 or more for new construction.

In February 1996, the Legislative Program Review and Investigations Committee voted to study prevailing wage laws in Connecticut. The committee was particularly interested in the costs and benefits of the law. It also reviewed the way prevailing wage rates are established, examined enforcement efforts, and compared existing statutory language with actual practice.

The primary Connecticut prevailing wage law is C.G.S. Sec. 31-53. The rates set for Connecticut by the U.S. secretary of labor under the Davis-Bacon Act are also used for the state law. Rates differ across categories of workers, geographic regions, and types of construction. Wage schedules indicate specific amounts for hourly pay and fringe benefits, and the total of the two components is the prevailing wage rate.

The Connecticut Department of Labor has primary responsibility for enforcement of the state's prevailing wage law. Its duties include maintaining the wage schedule database, responding to inquiries about the law, investigating complaints, and conducting routine field audits. In state FY 96, wage enforcement agents conducted 116 routine audits and site inspections and performed 241 complaint related audits and site inspections. The department found 285 firms in violation of law, and $1.4 million in past due wages were recovered for nearly 1,500 workers.

Governmental entities contracting for public works projects covered by the law are responsible for obtaining appropriate wage schedules and verifying required forms are filed by contractors and that the information in mandatory certified payrolls is correct. Contractors on prevailing wage projects must post wage rates at the job site and maintain detailed records regarding the hours, duties, and hourly wages of employees working on the project.

In order to determine the cost of the state's prevailing wage law, the program review committee compiled data on construction expenses and activities. In general, construction costs are highly variable. The major components are labor, materials, equipment, overhead, and profit. Although prevailing wage laws apply to the cost of "labor," not all of that cost is affected by prevailing wage laws. Certain personnel are excluded from coverage, and some expenses for covered workers change only partially or not at all when prevailing wage rates apply.

Based on an examination of data from past state projects and public hearing testimony, the program review committee believes it is reasonable to assume, on average, that the portion of a public construction project that is consumed by labor affected by the state's prevailing wage law is 25 percent.

With respect to the difference in wages received by workers on prevailing wage projects versus those on nonprevailing wage projects, the committee found a broad range of wage rates exist in the Connecticut marketplace. Based on data from a sample of jobs examined in detail, the differences appeared to fall within clusters. For analytical purposes, the program review committee believes it is appropriate to assume a range of 20 to 40 percent as the estimate of the hourly differential resulting from the prevailing wage law.

Given those estimates, the committee found the portion of a prevailing wage project's cost that is attributable to the law is between 4 percent and 7 percent of the total. Considering the nature of the public bidding process and the small portion of total expenditures estimated as the cost of continuing Connecticut's tradition of providing labor-related protections for construction workers, the program review committee believes the state prevailing wage law should be continued.

However, the committee proposes a key modification be made in the law, to resolve disputes regarding what constitutes a new versus a renovation project. Since a comprehensive definition of the term new would be difficult to craft, the committee believes a simpler solution would be to return to a single exemption threshold. Finding no relationship between previous changes in the thresholds and the rate of inflation, the committee proposes a $250,000 level, which is based primarily on available data regarding the estimated number and value of projects that would become exempt from the law.

Several terms in the state's prevailing wage law are unclear or inconsistent with current implementation practices. The committee's proposals clarify statutory language regarding which workers are covered by the law and what programs qualify as employee welfare funds. The committee also recommends increasing the penalties for contractors who repeatedly violate the law and reducing the amount of state bond funds given to contracting agencies that fail to carry out their responsibilities under the law.

Finally, the committee identified a second prevailing wage law (C.G.S. Sec. 31-54) that only applies to state highways. Its provisions are inconsistent with Sec. 31-53 and actual practice. The committee believes this other prevailing wage law is unnecessary.