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Labor reform fight to continue with prevailing wage battle


JEFFERSON CITY, Mo. – Gov. Eric Greitens will likely sign Sen. Dan Brown’s right-to-work bill Friday, marking the conclusion of years of effort by Missouri Republicans to get the legislation into law.

However, right-to-work’s passage is far from the end of labor reform in the state. House and Senate Republicans do not face the dilemma of the dog who caught the car; they have a full slate of proposals they hope to pass in the coming months that labor leaders in the state dread.

While paycheck protection bills are on the front end of that surge, Rep. Holly Rehder’s House Economic Development Committee heard testimony Tuesday morning on seven separate prevailing wage change bills that run the gamut of a full repeal of prevailing wage to allowing certain public bodies to opt out of paying prevailing wage for relatively small projects.

The prevailing wage serves as something of a minimum wage for construction workers on public construction projects ranging from minor upkeep, repairs and renovations to huge new schools, highways or other government buildings and construction projects.

However, efforts to alter or repeal the current prevailing wage laws irk unions, especially construction trade unions. In a prevailing wage system, the labor costs on a project are actually taken out of the equation when it comes to bids offered. In theory, the law allows for public bodies to look towards quality and highly-trained workers for public work projects. If a prevailing wage law is repealed or if they allow an opt-out system, it can lower wages for workers and laborers because some contractors can bid low because of lower labor costs.

Mark Dalton of the St. Louis Carpenters Regional Council looks to the state of Indiana when explaining the potential harms of repealing prevailing wage laws. After the repeal in 2015, Dalton says in wages dropped in Southern Indiana because of competition from more contractors across the border, while wages dropped slower in Northwest Indiana, near Chicago.

“In Missouri, we’ll be more like the southern part of Indiana,” Dalton said. “Arkansas- and Oklahoma-based workers, they’ll come across the border and take some of those jobs first.”

From a free market perspective, more competition is how the process should work, but in some areas, a prevailing wage repeal could mean a laborer’s hourly pay could drop from $30 to just $8 on some public works. That said, the idea of lower public expenses appeals to fiscal conservatives, especially when the state is in the midst of budgetary problems and especially when those funds come from taxpayers.

Rep. Joe Don McGaugh
Rep. Joe Don McGaugh (Photo by Tim Bommel/House Communications)

Rep. Joe Don McGaugh prefers an opt-out model instead of a full repeal, like the bill offered by Rep. Warren Love, because an opt-out model promotes something of a compromise. The current House committee substitute of McGaugh’s bill would allow public bodies to opt out of paying prevailing wage on projects under $1.5 million.

He has heard from his own constituents, many of them public school superintendents, who said they would continue to use the prevailing wage. McGaugh believes the prevailing wage in urban areas is roughly at the correct level, but for smaller counties with smaller budgets, paying $30 per hour on renovations or repair work can be a significant financial hurdle.

“For those larger projects I understand the need for prevailing wage and I also understand that charter counties have in their charters that they’ll pay prevailing wage,” he said. “My impetus is to help schools and to help those small counties.”

Other prevailing wage law bills also focus on assisting those smaller counties as well. Rep. Allen Andrews has two bills: one exempts counties of the third and fourth classification from the prevailing wage laws outright, and the other exempts those same counties from prevailing wage on projects less than $500,000.

Dalton prefers the idea of the limit, but he still says it comes with its own set of significant problems. For instance, a large $3 million construction project could be divided into three phases of $1 million each to technically stay under that $1.5 million limit and allow the opt out on prevailing wage.

How is prevailing wage determined?

The prevailing wage calculation is somewhat confusing, but the handy graphic from the Missouri Department of Labor shown below outlines the process (story continues after the break).

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Basically, contractors combine the number of hours worked by their employees on a given project, calculate their wage surveys provided by the department. After review, the mode is used as the prevailing wage for Class 1 and 2 Counties, including the charter counties of St. Louis, St. Charles, Jackson, and Jefferson. These areas are typically more urban and have had an assessed valuation of over $600 million for at least five years (Class 1 counties are over $900 million).

The process gets much more complicated in Class 3 and 4 counties which make up a majority of the state, specifically the rural areas.

“Really, they rely on local contractors to turn in their wages,” McGaugh said. “There’s no mechanism to focus what the actual wages are. The farther you get away from major metropolitan areas, the harder it is to calculate the market value.”

Dalton agreed with McGaugh on that point, but he does not believe reform is necessary, just better enforcement of the current law.

“The system we have in place should work theoretically is if some of these outstate contractors would report their hours,” Dalton said. “It would reflect a true prevailing wage for that area, but a lot of the contractors that work don’t take the time to report.”

An executive session on the multitude of prevailing wage laws has not yet been set.