/ 4 BHI/ The Prevailing Mismeasure of Wages

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8 Introduction

9 health. Today the federal government, 32 states and the District of Columbia have prevailing wage laws that originate from the original DBA of Table 1 provides data on whether a state has a prevailing wage law or not, as well as BHI/ The Prevailing Mismeasure of Wages / 9

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11 The OIG audited 837 WD-10 forms (submitted by contractors for determining the prevailing wage). Of these, 123 forms were found to be incorrect, with a total of 211

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15 surveyed will clearly be at an advantage. The prevailing wages in their area of employment will reflect recent changes in job categories and inflation. As a result, workers performing the same construction job in different locations may receive completely different wages which are not a result of differing market wages. For example, workers employed to work on the construction of a federally funded roadway that needs work in multiple counties within the same state, may receive prevailing wages that reflect data from different years. The prevailing wa BHI/ The Prevailing Mismeasure of Wages / 15

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17 example one contractor may allocate 100% of their employees benefit funds toward health insurance while another may opt to direct those funds towards life insurance. Those employers that already record their employees wage rates in the format required by the survey are more likely to respond to th BHI/ The Prevailing Mismeasure of Wages / 17

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19 Given the survey timeframe, the inclusion BHI/ The Prevailing Mismeasure of Wages / 19

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22 The OIG s most recent conclusion provides a quality assessment of the WHD methodology and enforcement. The report states:

23 The best method for determining prevailing wages comes from within the Department of Labor itself: the Bureau of Labor Statistics. BLS collects payroll data from specific employers that meet preset criteria. The data is more timely and accurate. The BLS Method To calculate wage statistics the BLS relies on three surveys: the National Compensation Survey (NCS), The Occupational Employment Survey (OES) and the Current Population BHI/ The Prevailing Mismeasure of Wages / 23

24 Office of Management and Budget in In this system there are over 820 specific job categories, which are then grouped into 449 broad occupations, 96 minor groups and 23 major groups. 21 After classifying the wages by job category, the wage data for each category is weighted according to the sample weight and the number of employees in the establishment. The data are also adjusted for numerous factors, including nonresponding establishments and the occupation work schedule. 22 The OES uses a semi-annual mail survey to / 24 BHI/ The Prevailing Mismeasure of Wages

25 government. The OES survey excludes workers that are self-employed, owners and partners in unincorporated firms, household workers, or unpaid family workers, 24 The twice annual survey over three ysts0 TsiTtedsTjE.0002 Tw Tw Td[( six an elsof) da BHI/ The Prevailing Mismeasure of Wages / 25

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28 predominately located in the southeastern portion of the country, except for Grand Rapids, Michigan and Portland, Maine. The bottom portion of Table 3 shows those MSAs in our database for which the DBA wages were higher, by the largest margin, than the BLS wages. Nassau, New York, Riverside, California, Edison, New Jersey, Santa Anna and Bakersfield, California show the largest dollar DBA wage premium, on average over $10 per hour, over the BLS wages. These cities are geographically concentrated in California and the northeastern / 28 BHI/ The Prevailing Mismeasure of Wages

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30 This overview of the data shows that there are large differences between DBA and BLS wages. Since, in some of the metropolitan areas, the DBA wages are much higher than the BLS wages and for other MSAs the BLS wages are much higher than the DBA wages there should be systematic errors explaining these inconsistencies. These inaccuracies warrant a closer examination of the wage estimates for these metropolitan areas. The DBA wage determinations for MSAs that were significantly below the BLS wages, as published online, have not been updated for several years, and in some cases decades. For example, the DBA wages for Wilmington, North Carolina show a publication date of / 30 BHI/ The Prevailing Mismeasure of Wages

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35 Table 4: Selected State and Federal Prevailing Wages Compared to BLS Wages Brickmasons and blockmasons Carpenters Cement masons and concrete finishers Electricians Painters, construction and

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38 Conclusion The WHD calculates, not the prevailing wage, but the wage that would prevail if the wage-setting process were dictated by the construction unions. The simplest way to eliminate this bias would be to repeal the DBA. Then we would know what wa

39 Appendix Methodology BHI/ The Prevailing Mismeasure of Wages / 39

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43 Sheet metal workers BHI/ The Prevailing Mismeasure of Wages / 43

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45 Sheet metal workers Missing two counties, applied largest counties wage to the missing counties, then used the weighted average BHI/ The Prevailing Mismeasure of Wages / 45

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47 BHI/ The Prevailing Mismeasure of sure of sure of

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50 under DBA (50%) to arrive at the total cost factor ( = ). To calculate the cost of the DBA prevailing wage (inclusive of total costs) we need to subtract one x from the observed cost divided by the BLS cost 1 = = 9.91% x. The result is that DBA wages increase total construction costs by 9.91%.

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53 Structural iron and steel workers Sheet metal workers Roofers Plumbers, pipefitters, and steamfitters Painters, construction and maintenance Electricians Cement masons and concrete finishers Carpenters Brickmasons and blockmasons BHI/ The Prevailing Mismeasure of Wages / 53

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55 Structural iron and steel workers Sheet metal workers Roofers Plumbers, pipefitters, and steamfitters Painters, construction and maintenance Electricians Cement masons and concrete finishers Carpenters Brickmasons and blockmasons BHI/ The Prevailing Mismeasure of Wages / 55

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57 The Beacon Hill Institute at Suffolk University in Boston focuses on federal, state and local economic policies as they affect citizens and businesses. The institute conducts research and educational programs to provide timely, concise and readable analyses that help voters, policymakers and opinion leaders understand today s leading public policy issues. February 2008 by the Beacon Hill Institute at Suffolk University The Beacon Hill Institute for Public Policy Research Suffolk University 8 Ashburton Place Boston, MA Phone: Fax: bhi@beaconhill.org BHI/ The Prevailing Mismeasure of Wages