Possible Revisions to Connecticut’s Prevailing Wage Laws

Construction going on in the city.

Anyone involved with public construction projects is familiar with the term “prevailing wage,” which is generally understood to mean the minimum wages established by the government for each labor class that works on a given project. 29 C.F.R. § 1.2(a)(1). Connecticut’s prevailing wage requirements are far less onerous than the federal law, which apply to any project that costs more than $2,000. 40 USCS § 3142. Connecticut’s prevailing wage law only applies to new construction where the total cost of the work is $400,000 or more, and on remodeling or rehabilitation projects where the total cost of the work is $100,000 or more. Conn. Gen. Stat. § 31-53. Nonetheless, the state is currently considering increasing the project costs for which the prevailing wage law requirements will apply, i.e. the law’s threshold limits; indexing the threshold limits to inflation; and/or exempting certain public projects from the requirements entirely.

Given the disparity between the state and federal requirements described above and the proposed bills, it is interesting to consider the goals that the Connecticut state legislature intends to achieve. For all the bills that increase the threshold limits and/or exempt certain projects, the stated goals are to reduce costs for town public works projects; reduce municipal tax burdens; and/or provide relief from state mandates to municipalities — all of which would indicate that the legislature believes the imposition of the prevailing wage law increases a project’s cost.

There is one proposed bill which seeks to substantially reduce Connecticut’s threshold limits and greatly expands the application of Connecticut’s prevailing wage law. The bill is an outlier that is not likely to become law but is interesting to consider because its stated purpose is “to create jobs in Connecticut’s construction industry.”

Given the importance of reducing costs and creating construction jobs, the question is whether prevailing wage laws actually have any effect on either. Nationally, the debate is not settled. Proponents claim that any increase in costs is insignificant and is outweighed by the law’s benefits such as higher wages. However, our legislature’s current proposals would indicate that they have the opposite view. With regard to potentially creating jobs, the Bureau of Labor Statistics does not track that information, which would make a reasonable analysis impossible. Another problem for researchers is the lack of a “control group.” The argument is that you cannot effectively evaluate projects for which the prevailing wage laws are not applied while prevailing wage laws exist. It is believed that the existence of such laws have an impact on all construction wages regardless of whether the law applies to a particular project. However, in a few years, the control group problem may be eliminated or mitigated because there has been a recent trend for states to repeal their prevailing wage laws. It may soon be possible for researchers to identify a geographic area that does function as an independent market place unaffected by prevailing wage laws.

The result of different laws in different states may once again demonstrate the value of “federalism.” As envisioned by Justice Louis Brandeis in a 1932 Supreme Court decision, different states can serve as laboratories for different laws without risk to the rest of the country. New State Ice Co. v. Liebmann, 285 U.S. 262, 311, (U.S. 1932). Of course, scientific inquiry is not the end of the argument.

We currently have a free market economy with ever increasing government regulation. On this level, a debate over prevailing wage laws is no different than a debate over minimum wage laws. Whether the government should be setting minimum wages for all or even specific job classifications on construction project is an important question in a free society. In light of the foregoing, I would urge the legislature to engage in more research and debate before enacting any changes to ensure that any revisions or repeal of the prevailing wage laws are done in the best interests of Connecticut’s business owners and taxpayers.