Department of Labor increases wage standard for federal contractors

The rule, which the Department of Labor will implement, will require that workers on projects that receive federal funding be paid based on the prevailing wage of an area, which cannot be less than the amount paid to 30% of workers in the area. The current standard, put in place by the Reagan administration in the 1980s, is 50% of workers.

“Common” or “prevailing” construction wages in state and federal law set minimum amounts construction workers must be paid on large government-funded projects based on the project area’s local economy and other factors. The prevailing wage is set differently for each type of construction worker classification needed for the project.

The administration projected that construction workers will receive thousands of extra dollars per year under the rule.

The new rule applies to the 1931 Davis-Bacon Act, which sets the floor for what contractors on federal projects must pay to their workers. “This update to the Davis-Bacon prevailing wage protections means our members are poised for a brighter, more secure future with fair wages,” the United Association, the union that represents plumbers and welders, said in a post on Facebook. The union described the rule as a “groundbreaking victory” for its members.

The trade group Associated Builders and Contractors has said it will file a legal challenge to the new rule. The group backed former President Donald Trump’s unsuccessful reelection campaign in 2020 and praised him for his opposition to pro-union legislation. They argue such rules over-inflate the cost of construction projects to taxpayers and unfairly favor union-affiliated and non-local construction contractors, as they tend to pay more.

Research published by the Center for American Progress in 2020 shows that workers benefit from prevailing wage standards. According to a report published in 2018 on the website of the public construction organization National Alliance for Fair Contracting, the policies help construction workers earn middle-class salaries and receive expanded health insurance. A studyconducted by the Illinois Economic Policy Institute in 2018 determined that the use of prevailing wages as a standard help to narrow the income gap between white and Black workers.

The rule is scheduled to be published in the Federal Register on Aug. 23. It will go into effect 60 days later, on Oct. 22. The Department of Labor will begin enforcing the rule for future contracts once it goes into effect.