2007 Legislative Outlook: Will minimum wage impact prevailing wage?

David Mitchell, Missouri State University economist and head of the university’s Bureau of Economic Research, said the culprit could be something called prevailing wage.

Prevailing wage “establishes a minimum wage rate that must be paid to workers on public works construction projects in Missouri, such as bridges, roads and government buildings,” according to the Missouri Division of Labor Standards Web site.

Contractors, unions and other groups submit information about the number of hours their members work and hourly wages their members earn to the Division of Labor Standards, a part of the Missouri Department of Labor and Industrial Relations.

The submitted information is then separated by county and industry, so there are many prevailing wages set across the state.

Mitchell said the minimum wage increase from $5.15 an hour to $6.50 an hour starting Jan. 1 would impact prevailing wages two ways.

First, prevailing wages are largely determined by union wages, which are often tied to minimum wage.

For example, union contracts may set wages at three-times minimum wage, using that as a base metric for negotiations, Mitchell said.

Unions are one of the main groups that submit wage and hour information to the state for determining prevailing wage.

Second, Mitchell said, the minimum wage increase will accelerate wage increases universally.

Business that employ workers at minimum wage will charge higher prices for goods and services in order to recover lost profit from higher wage expenses, Mitchell said.

That could cut purchasing power for everyone, even highly paid professionals, Mitchell surmises, which would lead executives to seek pay increases to keep pace.

If wages in general are increasing, then so too will prevailing wage, Mitchell said.

Because prevailing wage is paid for government work, taxpayers could ultimately pay for the increase.

However, local contractors and union leaders contacted for this story uniformly discounted the impact the minimum wage increase would have on prevailing wage.

“In the skilled building trades, we don’t have anybody out there working for minimum wage,” said Mark McCarty, business manager for Plumbers & Pipefitters Union, local 178. “I don’t see how it would ripple far enough to effect what we do.”

Plumbers & Pipefitters Union members currently earn at least $24.52 per hour, McCarty said.

Art Kessler, president for Carpenters Union, Local 978, said his union doesn’t use minimum wage directly to determine wages, though the increase could aid future contract negotiations.

In that way, he said he could see a connection between minimum wage and prevailing wage. However, he said the minimum wage increase wouldn’t have a sizable impact on prevailing wage.

Cynthia Quetsch, deputy director of Missouri Department of Labor and Industrial Relations, agrees with the union officials.

“I think that probably on a philosophical level, there’s a possibility that there would be a connection, but there’s nothing in the statute that makes it that way,” she said of the link between minimum wage and prevailing wage.

MSU’s Mitchell argues that the minimum wage increase could add to regular inflation and accelerate prevailing wage increases by as much as 20 percent.

“There’s lots of reasons why wages go up every single year,” he said. “One reason is inflation, another reason is productivity, and a third reason is just simply good old-fashioned supply and demand for workers within (an) industry.

“The minimum wage is just one more factor. That’s what makes it so hard to see.”

Information on prevailing wage

What is prevailing wage?

A minimum wage rate that must be paid to workers on public works construction projects in Missouri.

How is it determined?

Businesses, including unions, submit wage and hour information to the Missouri Division of Labor Standards regarding commercial construction work they have accomplished. Every February, Labor Standards separates the information by occupational title in each county. The prevailing wages are published initially in March. Formal objections are accepted before the final wage order is published in June. More than 7,800 reports contributed to this year’s wage order.

The prevailing wage for any given occupational title is determined by the company, or union, that submitted the most hours for that occupation in each county.

What are some of Greene County’s current prevailing wage rates, excluding fringe benefits?

• Asbestos worker: $27.61

• Bricklayer-stone mason: $25

• Carpenter: $20.93

• Cement mason: $18.09

• Ironworker: $22.60

• Painter: $17

• Pipe fitter or plumber: $24.52

Sources: Missouri Department of Labor and Industrial Relations, Division of Labor Standards