Prevailing Wage Mandate an Economic Chiller

If the state wants to discourage a certain kind of activity, what does it do? Sometimes it makes it more expensive, through a tax or fee, often causing those involved to give it up.

So shouldn’t it follow that by making something that’s desirable–like a construction project or a business expansion–more expensive could put a damper on that activity?   

HB 6705 does just that—taking the state’s current prevailing wage mandate that applies to municipalities and the state for construction or remodeling projects, and applying it to private-sector businesses. 

Oh, and by making it more costly, too.

The prevailing wage mandate requires municipalities and the state to pay “the prevailing wage”–an artificially high wage–to all workers on new construction projects of more than $400,000, or renovation projects of more than $100,000.

Most Connecticut cities and towns loathe the mandate because it typically hikes the cost of public works projects by 25% or more.   

In fact, municipal groups annually beg the Labor Committee for relief from the mandate. They say it puts them between a rock and a hard place–facing critically important repair projects with limited budgets that can’t afford having to pay a prevailing wage.

Oftentimes, the municipalities forego important projects because they can’t afford theextra cost.      

HB 6705 takes the prevailing wage mandate and drops it squarely in the laps of Connecticut businesses large and small, and it will likewise drive up the cost of constructing new facilities and cause some not to be constructed at all. 

Under the bill, any business receiving any assistance from the state—in the form of a loan, cash payments, extension of credit, guarantee, equity investment, tax abatement, or any other type of financing for any new construction or remodeling project–will have to pay the prevailing wage to all workers on that project. 

Even worse, the bill has no dollar threshold for businesses. So if the state extends a small loan to help a business pay for a massive renovation project, the business must pay the prevailing wage to all workers on that project.

Rather than seek state assistance at the expense of paying inflated wages, the likely outcome is that many businesses will forego construction–or even worse, engaging in that construction and expansion outside of Connecticut.

After all, why seek help to expand in Connecticut when so many other states are offering enticing economic development packages with far less strings attached. 

Connecticut is routinely ranked one of the highest cost states to do business. CNBC's 2014 America's Top States for Business ranked Connecticut #47 in the cost of doing business category. 

It's time for some lawmakers to realize that Connecticut is already a very costly place to do business. We should avoid increasing the cost of desirable activities, like construction–or face the possibility that businesses will expand their footprints elsewhere.    

For more information, contact CBIA’s Eric Gjede at 860.244.1931 | eric.gjede@cbia.com | @egjede