Unnecessary construction worker payouts cost New York $3B annually

June 05, 2012 10:00AM

New York state has unnecessarily spent an extra $3 billion annually on public construction projects in attempts to follow the prevailing wage law, according to a new report by Columbia University cited by Crain’s. State law requires that it pay union rates when at least 30 percent of the workers on a project are members of the union to ensure the government doesn’t undercut a local job market.

But as union membership declines, the report found that construction unions represent less than 30 percent of the workers throughout the state and in most local areas. Last year just 25.9 percent of state construction workers, and 23.6 percent of New York City-area workers, were covered by union contracts. The last time the number exceeded 30 percent was in 2002.

Nevertheless, the state continues to pay the prevailing wage rate, even as it increases the cost of projects by as much as 30 percent. The report argues that when fewer than 30 percent of workers are covered by the union, the state should pay the national mean with an additional outlay for benefits.

Union workers slammed the report and argued that prevailing wages should be expanded, not cut. [Crain’s]