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Not all wages are created equal. Here’s a breakdown of prevailing wages and how they’ve  changed the labor market for good.

The term ‘prevailing wages’ does have a triumphant ring to it, doesn’t it? To a lot of us, getting paid is a victory in and of itself!

Prevailing wages are hourly wages that include fringe benefits and overtime as established by the Department of Labor based on the kind of project and job classification (mechanics, building and road construction workers, and laborers). This hourly wage is the same for each worker; the difference is in the benefits. Life or health insurance, sick days, and PTO – including holidays – vary depending on the benefits available and the worker’s eligibility. Prevailing wages also reduce the chances of construction workers needing to use public assistance to support their families, and they provide older workers with adequate retirement income.

From the employer’s perspective, a prevailing wage is the threshold deemed acceptable to pay a worker in a certain industry. Prevailing wages are mainly available for jobs and employees in the public sector.

A prevailing wage is not the same as a minimum wage

The ‘minimum wage’ for employees is the federal minimum wage as outlined in the Fair Labor Standards Act and set by each individual state. If there’s a difference between the federal and state minimum wage, workers must be paid the higher of the two. Prevailing wage rates are usually higher than the minimum wage rates at the federal level.

History of the prevailing wage

Prevailing wages can be traced back to just after the Civil War, with the National Eight Hour Day proclamation. In a time when factory, building, and other public sector laborers worked a backbreaking 100 hours per week, President Ulysses S. Grant – revered Union General in the Civil War – issued a proclamation in 1869 that guaranteed an eight-hour workday without a decrease in pay. Various industries, such as manufacturing and printing, gradually caught on as time progressed until, in 1938, the Fair Labor Standards Act was passed to limit the workweek to 44 hours (8.8 hours/day) per week. Congress amended the same law in 1940 to a 40-hour workweek.

The eight-hour work day actually helped productivity: by limiting the workday to eight hours, contractors were more motivated to increase the efficiency of their workers than the length of the day to get projects done on time.

Prevailing wages first went into effect in 1891, with Kansas being the first state to adopt. Because of the now-regulated, limited time in the workday, prevailing wages were established to prevent non-union employers or contractors from offering lower bids on projects by undercutting employee compensation and compromising safe working conditions.

Prevailing wages and labor are still very much a part of today’s increasingly complex labor market, where millions of contracted workers (like Uber drivers) exceed 40 hours of work per week without overtime.

Why prevailing wages?

Twenty-two of the 50 states do not have prevailing wage and labor laws, including Illinois. While many states either do not have or ponder the repealing of prevailing wage laws, one cannot underestimate the benefits.

Prevailing wages essentially establish the worth of the work performed. Not only do prevailing wages promote higher wages, but they also positively impact American contracted workers at large. A higher value attached to job classifications and projects stimulates better worker training and apprenticeship programs to consistently maintain project quality. A highly educated workforce is a contractor’s best asset to getting this work done efficiently, promptly, and, most importantly, correctly. An educated workforce also reduces workplace injuries, as safety procedures are continually fine-tuned to reduce the use of liability coverage.

Additionally, a higher prevailing wage increases the amount of health and pension coverage utilized. Additional benefits for workers causes higher satisfaction and contributions to the workforce.

Is it wrong to say money motivates us? We can all agree it comes in pretty handy! But, when you consider all that goes into a seemingly simple wage, it is worth every penny to invest in your workers.

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