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Delaware's Prevailing Wage is Still the Problem

... | 11/28/2018

The Caesar Rodney Institutes Center for Economic Policy and Analysis has updated its 2010 comprehensive report on the methodology used by the Delaware Department of Labor (DDOL) in the calculation of the states prevailing wage and the methodology continues to be seriously flawed and tilted toward the union construction wage rates. The prevailing wage rate schedule published annually by the DDOL for all three counties must be followed for any capital project receiving state funds. The State has two clear choices which would show respect to Delawares taxpayers: 1) The Delaware Department of Labor (DDOL) can stop conducting the annual prevailing wage survey and instead use the current union wages by construction occupation. This would reduce DDOL annual operating expenditures by more than $1.5 million. 2) The DOL can substitute the detailed wage by construction occupation data collected annually through the U.S. Occupational Employment Statistics (OES) program. This would reduce the prevailing wage rates by almost 40% on average and free up nearly $63 million of spending from the States FY15 capital budget, including almost $18 million for more school capital improvements. In 2014 the DDOL prevailing wage survey was based upon answers from 163 firms covering 5,068 construction employees. Only 2% of the firms surveyed were categorized as "union" while 28% of the firms responding were union. Similarly, only 4% of the employees were classified as "union" while 20% of the employee responses were union.  One-third of the answering firms did not respond to the mailed survey but were solicited by the DDOL. Over 54% of the solicited firms were union. The most recent U.S. Occupational Employment Statistics survey for Delaware (May, 2014) included data from 300 unique construction firms covering 27,455 workers. With a standard error of less than 3%, the state could use the OES survey instead of the existing DDOL prevailing wage survey, a move which will reduce survey biases and increase the accuracy of setting appropriate levels for the prevailing wage. The result of the current DDOL prevailing wage methodology and the process through which the survey is conducted is prevailing wage rates higher than market rates for the construction industry. These higher-than-market wages translate to less competition in the government-funded projects bidding process, which translate into higher cost of government projects.   As a result the government ends up not completing as many capital improvement projects as are needed. You can see this like when the Route 13 and Route 896 bridges struggle to get completed on time; or where local school districts are calling for tax increase referendums to pay for capital improvements which are being made more expensive than necessary because of high labor wages. Meanwhile the states response is to raise the weekend toll on Route 1 and call for a ten cent per gallon increase on gasoline. All of these actions are unnecessary are related to one problem- Delawares prevailing wages make public construction projects so expensive the only way the state and local governments can pay for these improvements is to try to raise your taxes and fees. The full revised prevailing wage report will be available at www.caesarrodney.org in mid-December under the Center for Economic Policy and Analysis tab. Please share our articles and reports with your friends, family, and elected officials. The time to end the prevailing wage is now. Omar J. Borla, Director Center for Economic Policy and Analysis  


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