Prevailing wage is generally defined as the predominant wage and benefit rates within a geographic area. They can be established by either the State or Federal governments in one of two ways: 1) through a wage and benefit survey (most common when there is minimal union presence in the area, or 2) adopting union wage rates where unions demonstrate a dominant presence in an area.
In Massachusetts the Attorney General establishes the prevailing rate based on union scales (union dominance has been challenged on several occasions and failed).
The logic behind prevailing wages is that State and Federal construction spending is large enough to have a significant impact on wage standards if left unchecked. The prevailing wage standard was developed so that government spending will have a neutral impact. It recognizes that the appropriate wage and benefit standard is the one established within the community in the absence of government involvement. If the government pays less it can deflate local rates and if it pays more it can inflate local rates.
The debate over prevailing wages has been going on for a very long time. It is often suggested that prevailing wages are used to bolster the strength of unions and to increase costs for communities. Yet, over the years there have been numerous surveys that suggest that prevailing wages have minimal impact on the cost of construction. Wages and benefits only represent 20-40 % of construction costs. Higher paying companies usually are more efficient, provide better training and logistical support, and usually have higher rates of productivity.
Historically, financing has the greatest impact on construction costs.
This is not legal advice and is not intended to create an attorney-client relationship. You should speak to an attorney for further information.