By Rick Manning — Various media outlets breathlessly announced that there has been an immigration reform deal between the U.S. Chamber of Commerce and the AFL-CIO which establishes something called “prevailing wage” into the parts of the private sector of the economy that rely on immigrant labor.
But what is this thing called “prevailing wage”?
Prevailing wage (also known as Davis-Bacon) has been one of the hot button union issues since its inception as it demands that the U.S. Department of Labor set the cost for labor for federal government construction contractors rather than having the taxpayers get the benefit of competitive labor cost bidding.
In fact, the impact of Davis-Bacon on increasing the cost of government is so extreme that the 2012 Republican National Committee’s official platform calls for its repeal.
James Sherk from the Heritage Foundation writes in his article, “Repealing Davis-Bacon Act would save taxpayers $10.9 billion” that the Act requires taxpayers to pay wages that are, “22 percent above market rate.”
Sherk also notes that the Labor Department’s rate setting criteria has come under fire internally from the Inspector General’s office resulting in wide variance between the actual wages being paid for similar labor in a community than what taxpayers end up paying instead.
Suddenly, the term prevailing wage and all of its intricacies may be coming to private sector businesses who have nothing to do with government contracting as the U.S. Chamber and the AFL-CIO which both support immigration reform, came together to agree that the byzantine rules governing the determination of what the prevailing wage is should be foisted upon select non-government employers.
If the prevailing wage expansion goes into effect, and you own one of the major hotel chains that relies on immigrant labor, you probably will need to plan on hiring more people in human resources to try to keep you out of trouble. But if you are hiring people to clean the motel you bought for your retirement, chances are you don’t have a Human Resources Department, and you now will face a whole new set of burdens to determine the wages you pay your workers.
No longer would the wages be set by mutual agreement between two consenting parties, but instead, the government will be setting the wage, and figuring out what that wage should be for different job categories is not often easy.
For construction companies it can get even more messy, as the wage for each classification of work at one construction site can differ from that at another depending upon locale. For small to medium sized firms with job sites spread across a region, the combination of the increased costs of compliance along with the artificially increased labor costs are guaranteed to impact both the employer and the consumer in the wallet.
Bill Wilson, president of Americans for Limited Government puts it into perspective saying, “Prevailing wage laws have virtually forced small construction companies out of the government contracting bid process due to the complexity of following them. Now, if media reports are to be believed, Big Labor may be attempting to open the door to imposing prevailing wages on Main Street businesses through the immigration legislation. This would be a dream come true for Big Labor and labor attorneys, but a disaster for consumers and the hopes of small business people who will get ensnared in a web of unintelligible government regulations.”
It is anticipated that any prevailing wage provisions agreed to by third party groups included in the immigration legislation will be subject to rigorous debate in both the Senate and House of Representatives and some political observers are privately wondering if their inclusion will serve as a “poison pill” preventing passage of the underlying immigration law.
While it is unclear whether the House of Representatives would take up a Senate passed bill, the inclusion of a prevailing wage provision would likely throw attempts by the House to pass the legislation with majority of Republicans in support into disarray.
The Senate is anticipated to take up the legislation as early as May.
Rick Manning (@rmanning957) is the vice president of public policy and communications for Americans for Limited Government.
