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Figuring Out

Information on Prevailing Wages

For years, local governments have made it clear that if any company is interested in contracting any public works, it should ensure that the employees have been paid an amount of money that is similar to the one that is commonly received in that location. The federal government itself has formed wage requirements and laws that should be observed by every contractor. The laws also state that the government should not reduce the wages, taking that it is considered to be a major buyer when it comes to the construction field. The wage laws were initially pushed by civic minded individuals who believe that the government should work on enhancing the welfare of workers.

However, there are critics of the prevailing laws. According to them, they suggest that the laws only inflates the contract costs of the government. However, studies have shown that this is not entirely true. The regulations do not impact the government in any given way. The studies were done based on comparing the costs of contracts subject to the wage. Other researchers have used the time series approach. The approach examines whether the costs of any contract have changed by considering the prevailing wage requirements.

According to the studies, prevailing wage laws have an ability to provide for the workers with social benefits by ensuring that they have been provided with higher wages and better working areas. The laws are also important as they ensure that the employee skills have been improved on. However, there exists research that doesn’t agree with the results that were obtained based on hypothetical models. In the model, the writers do calculations on increased wages based on the prevailing wage regulation. They then assume that the increase in wage is delivered to the government in the higher contract costs. The higher contract costs are then calculated.

However, there is a great flaw in such a study as it assumes that the whole wage increase results to a higher contract cost. It is also a study that has been done without examining it properly. This is because it fails to tell us whether higher wages result to higher contract costs. Recent studies have disapproved everything that the model assumes by showing that there are various factors which remove most or the entire hypothetical additional costs.

Today, most of the studies have favored the econometric approach. The approaches are used for comparing different situations where prevailing wages have been applied, and they are not supposed to. According to the more sophisticated studies, there is no relationship that exists between the prevailing wage laws and the contract costs. In a nutshell, recent studies found out that prevailing wages laws do not affect or increase wages in any particular way. It is therefore possible for the public contractors to pay their employees at prevailing wage rates without following any regulations in this case. In addition, according to the same studies, the average labor costs are estimated to be a quarter of the amount of money used in construction.

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