The International Experience - Prevailing wages
Description
Determined by the Davis-Bacon Act (1931), prevailing wages in the USA are generally higher than the minimum wage, but can be lower than a living wage (see text below). Prevailing wages do not prevent workers being paid a poverty level wage. The Act applies to federal [5]and state construction work - generally male dominated occupations. The prevailing wage levels for different occupations are published by the federal and state governments.
The motivation for this legislation was both to insure that workers on government projects could earn a living, and insure against low-quality work by low-bidding contractors - similar objectives to Living Wage Ordinances discussed in the next section.
A current variation on the prevailing wages approach was taken by the Greater London Authority (GLA) in England. They were the first public authority to enact a fair wages policy. In 2002 the GLA introduced a fair employment clause into its contracting procedures. Private contractors working for GLA are now asked if they are willing to pay their staff at least the equivalent of public sector wages for the same jobs. This may have been implemented to extend the formal provisions of Transfer of Undertakings (protection of employment) regulations (TUPE) to all contractors (see later discussion on TUPE). The GLA has so far applied this policy for the cleaning and catering services for City Hall.
In 2005, the mayor of London told a Trade Union Council conference that then London Olympic and Paralympic Games would set new standards for fair employment. He said:
'We have drawn up an initial statement of the principles we want for the Games. These cover areas from environmental protection, to skills development and the acceptance of a Living Wage.'
The GLA has developed draft Procurement Principles for the Olympic Delivery Authority to ensure that they include provisions for '...employee representation, fair and ethical employment, London living wage ...'[6]
Impact
'The impact of Davis-Bacon has been investigated quite carefully by labour analysts. Regarding competitiveness, this research found that by providing a level playing field, responsible, higher-quality contractors were able to compete successfully with 'lowball bidders'. In addition, the research shows that increased labour costs were generally absorbed through more efficient production. One study of the effect of repealing the state version of the federal law in Utah was that total cost overruns on state highway construction tripled after the act was repealed' State version have generally found that contracts were completed more efficiently and with fewer delays.[7] (Bernstein: 2002)
The status of prevailing wages sometimes appears fragile. For example, in 2004 the White House temporarily suspended the obligations of businesses to pay prevailing wages during the re-building after hurricane Katrina.
Possible relevance to New Zealand
In many ways, prevailing wages are similar in intent to the ILO Convention 94 and will be most useful when there is established award or collective contract rates for particular occupations. It is difficult to see any general applicability of prevailing wages in a highly deregulated labour market such as New Zealand.
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[5] Most State governments have also adopted this law.
[6] Greater London Authority. (2005, September). London Games will set new standards for fair employment, says Mayor. Press release.
[7] Bernstein, Jared. (2002, May/June). Making a Living – How the Living Wage Movement has Prevailed. NHI (National Housing Institute) Issue 123.
