Illinois House fails to override bill tying prevailing wage to union rates

The proposed legislation would have hiked costs for taxpayers and undermined market forces, all to benefit special interests.

The Illinois House of Representatives Nov. 29 failed to override Gov. Bruce Rauner’s veto of Senate Bill 2964, which would have given labor organizations the power to determine prevailing wages for public works projects. SB 2964 provided that prevailing wage rates would be tied to collective bargaining agreements, which govern the pay of labor union members. This vote is a win for state taxpayers, whose tax dollars on public projects won’t be subject to labor organizations’ interest in driving up labor costs.

Prevailing wages are government-imposed hourly minimum wages placed on government contracts for public work. This means that for each public—or taxpayer funded—project, the public body overseeing the project or the Illinois Department of Labor must ascertain the local prevailing wage and must pay contractors no lower than the prevailing wage. Prevailing wages are intended to protect workers on public projects against exploitative wages in relation to the nature and locality of the work. But in practice, prevailing wages tend to produce artificially high wages for workers on public projects while private sector wages remain subject to market demand. Prevailing wage rates thus drive the price of public works projects higher for the taxpayers who fund them. Equally harmful, the requirement for prevailing wage rates also prevents construction firms from submitting bids with lower wage levels, which reduces competition and opportunities for new firms trying to establish themselves in the field.

The bill would have transformed the way prevailing wage is calculated, so that collective bargaining agreements in the area in which the work takes place would determine the rate. This is problematic, because labor organizations advance their private interests while not necessarily advocating for taxpayers. Under current law, collective bargaining agreements are often among the various factors used to determine prevailing wage. But this bill would make collective bargaining agreements the determining factor in ascertaining prevailing wage for Illinois’ various localities, provided that the agreements considered cover at least 30 percent of the workers doing similar work in the area. This means the salaries of 70 percent of the workers in the locality of a public works project could be entirely disregarded when calculating prevailing wage.

Furthermore, the bill would have placed the wage setting process for public works in the hands of labor organizations that serve private interests, as opposed to local governments or the Illinois Department of Labor, which are accountable to Illinois taxpayers. This would bring about added costs for taxpayers for public projects, would undermine the power of market forces to set wages and use tax dollars to serve special interests. The bill would also diminish local governments’ authority to set prevailing wage rates in their localities, mandating they defer to local collective bargaining agreements. This would hamper local governments’ ability to control their own spending.

The failed override of the governor’s veto of SB 2964 will result in lower costs for taxpayers and less politicization of prevailing wages.