Dems Spike Prevailing Wage Reform

JAN. 5, 2012

By KATY GRIMES

As work in the California Assembly began for 2012, on Wednesday the festive mood quickly was quashed. In the first committee hearing of the New Year, the Assembly Labor and Employment Committee killed two bills by Assemblywoman Shannon Grove, R-Bakersfield,  AB 987 and 988. The bills would have reformed and updated state prevailing wage laws.

A prevailing wage mandates a certain payment to workers for government projects. It’s designed to prevent non-union contractors from underbidding union contractors.

Grove’s bills would have changed the calculations for prevailing wages, and allowed local governments to determine their own prevailing-wage policies.

“The reforms in these bills are bold and significant steps to reviving our dire economy and putting Californians back to work,” Grove said.  “Forcing citizens to pay amounts for projects beyond what the local free market would otherwise dictate is a misuse of taxpayer dollars.  Unfortunately, the powerful union interests benefit at this taxpayer expense.”

But discussion of the free market went nowhere in the committee hearing.

The state prevailing wage, initially designed only to impact public projects, has crept into many developments that most people would consider private, such as home construction or business expansion.  Grove sought to repeal many of these provisions, as well as modify the way prevailing wage rates are determined.

In a free market, wage rates will vary based on many different conditions. Grove said that the state’s method for calculating prevailing wage rates results from collective bargaining agreements. “No longer will prevailing wage rates in urban coastal areas apply to rural inland areas,” Grove said of her reforms.

Labor Opposition

“Should we actually trust contractors to pay a good wage?” asked Cesar Diaz, deputy legislative director at the State Building and Construction Trades Council, a group opposed to Grove’s bills. “Prevailing wage has helped the middle class.”

At the hearing, all of the opposition to Grove’s bills came from labor union representatives. Most of the opposition claimed that, if the prevailing wage laws were modified, private employers would only pay minimum wage. “The result would be lower paid, less skilled workers,” said Sara Flocks, public policy coordinator at the California Labor Federation. “We need to level the playing field for workers.”

But Grove was adamant that the bill does not repeal the prevailing wage.

Jobs Leaving

Because of the state’s current methods of calculating construction wage rates and determining where these rates apply, Grove explained that Kern County and other rural areas in California are losing private and public construction jobs, as well as jobs in private commercial and industrial development.

“The artificially increased cost of state-mandated construction wage rates plays a substantial role in this economic crisis,” Grove said.  “There is no reason why residents in Kern County should have to pay the same for public works as those in San Francisco or Los Angeles. These bills would have given local governments the right to decide what their own prevailing wage rates should be given their cost of living and local market conditions.  However, shown by today’s vote, the Democrats seem content with big-government policies that hinder economic growth and private sector job creation.”

“It’s a total gutting of prevailing wage laws,” said Assemblyman Luis Alejo, D-Salinas. “It’s been around for the last 80 years to protect middle class jobs.” Alejo explained that “the shrinking middle class needs the prevailing wage to be maintained and preserved so they can afford mortgages, afford to send their children to school, and afford to pay their bills. It’s just part of the cost of doing business in the state and is a fair cost.”

Kevin Dayton, with Associated Builders and Contractors, the bill’s sponsor, told committee members that most of the modifications to the prevailing wage laws were added during the Gray Davis administration, and actually have nothing to do with employee compensation.

“Currently, contractors are required to pay state-mandated construction wage rates to workers engaged in various occupations allegedly related to public works construction,” explained Rob Smith, Grove’s legislative director, after the hearing. “The definition of public works has been expanded in recent years to include numerous kinds of privately built projects that most reasonable Californians would not consider to be government projects.”

The hearing took a strange turn when Assemblyman Mike Allen, D-San Rafael, asked how much discussion went on before the hearing with organized labor. “You are talking past one another,” Allen said.

Dayton answered that Associated Builders and Contractors had been at battle with organized labor since 1950, when the organization was founded. “The statute was pieced together over the years. However, some people recognize that it needs updating,” Dayton said.

Free Market Concerns

“Your bills go too far,” Assemblywoman Mariko Yamada, D-Davis, told Grove. “I have concerns about free market forces. We need certain standards for public works projects. These false dichotomies don’t serve us well going into the New Year.”

Assemblyman Warren Furutani, D-Los Angeles, called the fight between labor and the private sector “trench warfare.” He asked, “How normal is it for some company to make these kinds of profits while workers take less? Is it normal for workers to take less so someone else can take more?”

Assemblyman Mike Morell, R-Rancho Cucamonga, challenged Furutani’s comments. “These are basic economic principles. You can’t spend more than you earn,” Morell said. “Less regulation means free markets.” Morell said people are leaving California for states with “crappy weather and bugs,” for lower tax rates and less regulation. “You want the facts? Those are the facts.”

Assemblyman Sandre Swanson, D-Oakland, the committee chairman, called employees “equal partners” with employers. “You can’t work them harder for the lowest wage. There’s a cost to doing business.”

Both bills failed to pass committee on a 5-2, party-line vote.