Prevailing Wage Law Harms Philadelphia’s Black Workers
Since construction began on the Philadelphia Convention Center, the city’s black construction workers have protested, with good reason, the lack of opportunity for minority workers on public construction projects. Unwilling to risk losing political support from unions by challenging their discriminatory hiring practices, Mayor Nutter chose instead to issue a report, stating that minorities should account for 32 percent of workers on the city’s large-scale construction projects.
However, the only means the mayor has to achieve this goal is to give taxpayer money to unions in order to place more minorities in union apprenticeships. Apprenticeships can last three to five years, and it is unlikely that any city funding will continue for that duration. The mayor’s short-term solution creates an additional cost to taxpayers, while failing to address the root causes of the problem—Pennsylvania’s prevailing wage law.
Pennsylvania passed its prevailing wage law in 1961, 30 years after the federal Davis-Bacon Act. Prevailing wage laws were originally passed to prevent workers in other states—mainly black laborers in the South—from taking public construction jobs. At the time, union organizers testified in Congressional hearings that, "colored labor is being brought in to demoralize wage rates," referring to black construction workers as "an undesirable element of people." Due to union pressure, this blatantly racist law has remained at the federal level and in 32 states, including Pennsylvania.
According to federal statistics and a report by the Greater Philadelphia Urban Affairs Coalition, minorities account for only 8-20 percent of construction workers on large-scale city projects. Additionally, 70 percent of these workers do not reside in Philadelphia.
The AFL-CIO responded to Mayor Nutter’s criticism by stating that the city’s unions often bring in workers from areas outside the city, such as Delaware and southern New Jersey, where there are not as many black workers. This undermines the very reason why prevailing wage laws were originally created. Instead of preventing black workers in other states from taking public construction jobs in Philadelphia, unions are shipping in workers from other states to prevent Pennsylvania’s black laborers from working on prevailing wage projects. The law was racist when it was passed, and it is still racist today.
In the past 30 years, 10 states have repealed their prevailing wage laws. Studies found that in these states, repeal has reduced the wage gap between black and non-black construction workers by 60 percent. On average, wages for black construction workers increased 5.5 percent after repeal.
Black workers in non-prevailing wage states not only receive higher wages, but also have more job opportunities. While black employment in the construction industry decreased nationally, the decrease was limited to 2 percent in non-prevailing wage states. In prevailing wage states, the decrease in black employment was higher (11 percent). Black construction workers have the most difficulty finding work in states where organized labor unions continue to thrive.
Although the prevailing wage law intended for several factors to play a role in determining the wage, similar to the federal surveys conducted under Davis-Bacon, the prevailing wages are simply set equal to union rates. As a result, the labor costs for public sector construction jobs in Pennsylvania average 37 percent higher than what the private sector pays for the same work and 44 percent higher in Philadelphia. Given the average cost of labor, this adds a little over 20 percent to the cost of every taxpayer-funded construction project.
Construction of the Philadelphia Convention Center was budgeted at $700 million. Ignoring that the actual cost will likely be significantly higher, taxpayers would have saved $140 million on this project alone in the absence of the state’s prevailing wage law.
Philadelphia, which has its own prevailing wage law on top of the state’s law, is going to force taxpayers to pay more for construction projects to achieve racial diversity, when the same results could be achieved with substantial cost savings by removing the prevailing wage requirement altogether. Mayor Nutter and state lawmakers should stand up to the labor unions in support of the city’s black construction workers.
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Christopher Dodds is a Research Intern with the Commonwealth Foundation (www.CommonwealthFoundation.org), a public policy education and research institute located in Harrisburg.
Permission to reprint is hereby granted provided the author and affiliation are cited.