Any contractor seeking to establish a niche in public works construction must understand the concept of prevailing wage legislation. Non-union contractors, in particular, in order to produce a competitive and profitable bid, must take into account the labor costs involved in these projects. Simply put, prevailing wage (or “Davis-Bacon” as the laws are often referred to) is the hourly rate and fringe benefit contribution contractors are required by law to pay when working on federal or state construction projects. The pay and benefit rate is set by the U.S. Department of Labor for federal projects and by labor commissioners, departments of industrial relations or similar agencies for individual states. The need for adhering to Depression-era labor law, the specific rates set by governments and even the methods that states use to determine them are often debated. Furthermore, the rates are typically slanted towards inflated union wages, as opposed to the market rate wages.
Davis-Bacon was established to ensure that tradesmen on public works construction projects will receive fair wages to support themselves and their families. A living wage in rural Georgia would hardly support a family in Manhattan, hence the need for computing regional prevailing wage. Second, prevailing wage ensures that union contractors, who must pay inflated hourly labor rates, can compete with open shop builders on public works projects. Today neither reason is why the law still exists in its present form.
Prevailing wage gained a foothold in the United States with a minimum wage law that passed in Kansas in 1891. The federal government adopted a prevailing wage law in 1931 after workers imported from Alabama to New York were paid the going rate for laborers in Alabama. The resulting Davis-Bacon law – named after its sponsors in Congress – with subsequent amendments and updates, forms the federal prevailing wage regulation and the framework for most state laws.
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