Prevailing wage flaws


The following editorial appeared in the Charleston (West Virginia) Daily Mail on June 10:

The hand-wringing and controversy over the calculation of West Virginia’s prevailing wage rates provides a vivid illustration of the problem with government setting private wages.

The state agency charged with recalculating the rates has come up with a methodology. Republicans in the Legislature have rejected that methodology, saying it isn’t consistent with the statute they passed earlier this year. Democrats dispute that.

In all the back-and-forth, it’s easy to lose sight of what’s happening here: Bureaucrats in Charleston are bickering over the prices that taxpayers across the state will pay to private contractors for publicly funded construction projects.

This may be difficult for the bureaucrats to grasp, but here’s how wages are determined in the real world: workers and employers negotiate over the price and other terms for labor. Eventually, they agree on an arrangement that leaves both sides better off.

The work is done, and the wages are paid. No government hearings are held. No input from politicians or economists is necessary.

It’s a process that happens millions of times every day, including on publicly funded projects in the many states that don’t have prevailing wage laws.

The partisan back-and-forth over how to set new wage rates simply shows how flawed those rates are likely to be — too high in some cases, too low in others. There is no way a panel of economists, however erudite, can set accurate prices for labor. Market conditions are constantly fluctuating across the state in ways that no number-cruncher can fully comprehend or predict.

Prevailing wage remains the law in West Virginia, and until that changes, policy-makers must find a way to settle their differences and agree on a methodology for calculating rates.

But let’s not fool ourselves about the meaning of what those rates turn out to be. However “scientific” the method of calculation, taxpayers will still likely be paying distorted rates for construction projects. If accuracy is what lawmakers are after, they’re better off letting the market decide.

Online: http://www.charlestondailymail.com

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