Why prevailing wage standards are good for workers – and even good for developers.
By Matthew Miller
MARCH 04, 2020
The development and re-use project at the former Concord Naval Weapons Station has now been nearly 15 years in the making. With plans for 13,000 housing units, a college, and more than 8 million square feet of commercial space, the Naval Weapons Station could be a regional economic engine for decades.
In winning the Concord City Council’s selection as master developer for the project, the Florida-based developer Lennar made a number of commitments to the community, and has entered into discussions with the city and relevant labor stakeholders regarding the best ways to honor them. Among them, an agreement that would cover things like the hiring of local construction workers and paying the local market prevailing wage.
Recently however, reporting indicates that Lennar may not sign onto an agreement that does right by the skilled workers by paying them prevailing wages, because it claims that doing so does not pencil out. Before any hasty decisions are made, it is important to dispel such myths.
Prevailing wage is the local market wage floor for specific types of skilled construction work. It includes not just wages, but investments in apprenticeship training that ensure communities can meet their long-term construction labor force needs. Both the federal government and 25 states, including California, have laws that prescribe these standards for schools, roads, and other types of public construction to ensure taxpayer-funded projects are done right the first time.
Over the years, armies of economists have studied whether prevailing-wage standards make construction projects more expensive. The overwhelming consensus of peer-reviewed studies is that they do not. The reason why is because construction labor constitutes less than a quarter of total project expenditures on average. In other words, it is simply not what drives costs. And research also shows that projects paying prevailing wage consistently offset higher wages with higher levels of productivity and less spending on materials, equipment, and other purchased services.