The Business Council of New York State, the state’s leading statewide business and industry association, strongly opposes this legislation that would impose public works “prevailing wage” standards on most private sector projects receiving any level of financial support from state or local entities, including loans, grants, tax abatements and other government sources of aid.
The result of this legislation would be to significantly increase the labor costs, and therefore the overall project costs, of all projects subject to this new wage mandate. The public works “prevailing wage” as calculated by the state Department of Labor can be significantly higher than typical actual wages in local labor markets.
Currently entities such as industrial development authorities (IDAs) and local development corporations, amongst others, facilitate economic development projects around the State under a number of assistance programs. Under this proposed law, such projects would now be classified as “public works” and subject to public works prevailing wage.
The bill lists a variety of scenarios under which various projects would be deemed public works when “the state or public entities” lend even the slightest amount of financial support. If any of the numerous entities classified as “public entities” under this new law secures funding, waives a fee, reduces or forgives a charge, or transfers any property at less than fair market, the project is deemed a public works project subject to prevailing wage laws.
The bill also goes to great depths and includes a vast and inclusive list of all work deemed “construction” running the full gamut from pre-planning/survey to construction and “custom fabrication” culminating in “all cleanup work.” Thus, the bill both expands the definition of “public entity”-supported projects, as well as capturing almost any conceivable “construction” activity to insure the project contains some aspect of “public work” requiring its classification under this new law.
The inclusion of “custom fabrication” also poses a serious bookkeeping and logistical problem. Since this bill includes almost every conceivable fabricated material (i.e. “masonry panels, woodwork, cases, cabinets, or counters, and the fabrication of plumbing, heating, cooling, ventilation, or exhaust duct systems”) “regardless of where the custom fabrication is performed” contractors would be forced to determine prevailing wage on the most obscure items coming from various parts of the country or world to the work site. Even the movement of aggregate such as “sand, gravel, stone” – which may come from locations far from the construction site and in split loads from several other work sites – are covered by this prevailing wage mandate. The additional time and effort to sort of products, costs, prevailing wage rates, would be astronomical.
To enforce these new and radical changes, the bill provides for “stop-work orders” when a complaint is received regarding the nature of these projects vis-à-vis these new changes under the Labor Law.
By unilaterally changing the status of the entities providing economic development and deeming all work assisted by said entities as public work, New York State risks a massive increase in the overall cost of construction and great uncertainty in the exact status of private economic development.
Earlier this month, a New York City-based business organization suggested that legislation to extend the state’s public works “prevailing wage” mandate to private economic development projects should focus on upstate New York. It argued that regional economic challenges including, in their words, “chronically weak economic conditions,” having a “lot of . . . out of work or under-employed” construction workers, and “little private construction activity” could be solved, interestingly enough, by making economic development projects receiving state or local financial assistance up to 30% more expensive.
This is consistent with comments we have heard from various legislators, who argue that this prevailing wage mandate is justified by low wages paid to upstate construction workers.
These arguments regarding lack of employment and low wages simply are not supported by New York State Labor Department data.
It is widely recognized that much of New York’s post-recession job growth has been downstate, in New York City, Long Island and the northern suburbs, with a few upstate bright spots (e.g., the Capital Region, Tomkins County, Erie County). That job recovery pattern applies to construction jobs as well.
Statewide, construction jobs in 2018 were 11.1% (or 40,000 jobs) above their 2008 pre-recession levels, but more than 70% of that growth was in New York City alone.
In upstate (which we are defining as NYS excluding NYC, Long Island and Orange, Rockland and Westchester counties), construction employment in 2018 was actually up slightly from pre-recession levels, with an increase of about 1,000 jobs. The upstate construction job growth rate was just under 1%, slightly below the growth rate for all upstate private sector jobs over the same period, but nearly matching the 1.4% national growth rate for construction employment. (Note, compared to 2010, the recession’s job low-point for most areas and industries, upstate construction jobs are up by 13,823, or 14%).
Even so, the construction sector in upstate has shown modest job growth, not massive job loss.
Equally important, as shown in the following chart, the construction sector remains a relatively high wage sector across upstate New York. In seven of eight upstate labor regions, average annual construction sector wages exceed overall private sector wages by at least 22 percent (in the eighth, construction is more than 12%, or $6,000, above average regional private sector wages.) The construction wage differential is as high as 44 percent in the North Country region.
In short, the upstate construction sector is recovering, albeit somewhat more slowly than the overall sluggish job recovery rate across upstate New York. Even so, it remains one of the region’s top wage paying sectors.
For these and other reasons, imposing significant, mandatory construction wage and benefit increases on an industry and region with low growth rates, and relatively high labor costs, makes no sense. For these reasons, we oppose S.1947 / A.1261.
|Upstate Region||2018 Average Construction Employment||# Change from 2008||% Change from 2008||Average Construction Earnings||Average Private Sector Earnings||Average Construction versus Private Sector Earnings|
|Hudson Valley (excluding Orange, Rockland and Westchester)||11,562||-413||- 3.5%||$60,140||$46,421||+29.5%|
Data Source: Quarterly Census of Employment and Wages (QCEW) https://www.labor.state.ny.us/stats/LSQCEW.shtm