Contractors worry repeal of prevailing wage would decimate industry

Sircal Contracting owner Chris Hentges stood in the lobby of The LINC, the new Lincoln University/Jefferson City Parks and Recreation wellness center, last week, marveling at what he saw.

The smell of varnish on four spotless new basketball courts wafted into the lobby. One floor below, in a new locker room being built for the Lincoln University football team, the smell of sawdust, fresh paint and new concrete filled the air.

The first time he saw the site, it was just a rocky bluff.

"I thought, 'How's that going to fit there?'" Hentges said.

Jefferson City contractors like Hentges and Meyer Electric Vice President Craig Linhardt are worried, though, about a bill working its way through Missouri's General Assembly that could repeal Missouri's 58-year-old prevailing wage law, which requires construction workers on taxpayer-funded projects to be paid state-set minimum wages.

Proponents of the law's repeal, including Gov. Eric Greitens, say repealing prevailing wage will save taxpayers money and create jobs.

Local construction companies say it could force them to make painful cuts.

Currently, workers on public projects are required to be paid a minimum wage set by the state. Created in 1959, the law is similar to the Federal 1931 Davis-Bacon Act, which requires workers be paid minimum wages on federal construction projects.

If approved, House Bill 104 will repeal the state law while still mandating contractors pay workers at least federal or state minimum wage, whichever is higher. If they choose to, contractors may still pay employees more than that amount. It would take effect Aug. 28.

Thirty-one states have prevailing wage laws. Some, like Arkansas, Kentucky and Tennessee, have a minimum amount that must be spent on a project before the prevailing wage law guarantees workers certain wages. Others, like Missouri, Illinois and Nebraska, cover public works projects no matter the contract amount.

Pay differs by skill set and county. In Cole County, carpenters make $25.16 and iron workers make $28.96 per hour. In rural Benton County, carpenters also make $25.16 while iron workers make $29 per hour.

Each year, all contractors, both union and non-union, are required to turn in the hours they worked to the Missouri Department of Labor and Industrial Relations. Because local unions collectively bargain wages in each county, all union contractors are lumped into the same pool.

To determine the prevailing wage in each county, the state compares the number of hours worked in each county at the collectively bargained rate and the rate non-union contractors pay. The rate with the most hours worked each year prevails and becomes the wage for each skill set in each county.

State Rep. Warren Love, R-Benton, introduced HB104 in January. The bill passed the House on March 30, but has been stuck in the Senate ever since. With five days left in the legislative session, the bill must still pass the Senate before the session ends Friday and be signed by Greitens to become law.

Love estimates its chances of becoming law at 30 percent. He blames Senate in-fighting for halting debate.

"I'd like to hope we'd have a special session and bring it up in that if they can't get their act together," Love said.

If HB104 passes, Hentges and Lindhart think their businesses will be fine in the short run but worry about what will happen if another recession hits.

"Nothing is ever affected right at the beginning," Linhardt said. "It's always during the downturn in the economy when it affects everything."

Before the Great Recession, Sircal employed 85 people. Today, it employs just 50. Hentges' laborers know construction jobs are cyclical, but he also had to cut three office jobs he hasn't hired back.

With public projects making up about 80 percent of revenues for both businesses, both men worry a repeal of Missouri's prevailing wage law could force them to cut more.

"It's busy now, and it has been for a long time," Hentges said. "But it took a long time for it to get busy again, and prices still haven't gone up enough that everybody's comfortable."

Both also worry it will drive down wages for their employees.

"They need a living wage," Hentges said.

In the wellness center locker room, about 10 workers from various companies buzzed like bees as they installed insulation, cut shower tiles and hung new Sheetrock walls.

Carpenters Tim Wilson and John Shannon work for Jefferson City contractor Modern Interiors. Wilson began his job 32 years ago, Shannon 24 years ago. Shannon enjoys the work and admits he can't work in an office like his wife does.

When discussing the prevailing wage issue, many contractors around Jefferson City get emotional because they recruit employees like Wilson and Shannon who want to work in the industry for decades and who care about their work. Linhardt finds most of his electricians through two unions he works with that train employees. Hentges usually hires carpenters then refers them to unions for further training.

Most construction jobs put employees on a five-year apprenticeship that educates employees as they work. During this apprentice period, companies pay employees while they work four days per week and spend one day per week at classes taught by local unions. After five years of training, employees get paid at full-time rates.

"Our guys get done with a job like this one, they walk off of it and they're proud of it because of the craftsmanship," Linhardt said.

Hentges added: "We want people that want to be trained, that make it a commitment. If you don't know how to do it the first day, 10 years down the road you know how to do this work."

Wilson said he earns $39,000 per year but worries with a prevailing wage repeal he'll make half that.

"It ain't like we're getting rich out here doing this," Wilson said. "But we're making a decent living."

Others in the construction industry told the News Tribune construction jobs wear out their bodies, so construction workers can't work as long as people who work in offices or other industries.

For union workers like Wilson and Shannon, the prevailing wage battle is a sucker punch after Greitens signed a bill in February making Missouri the 28th right-to-work state. That law still allows unions to represent workers, but allows employees to opt-out of paying union dues.

Love frames the issue as one of friction between rural communities and the handful of urban centers around the state. In his Jefferson City office, he wears wheat-colored cowboy boots with chocolate soles. A tan Stetson hat hangs on a coat rack in one corner, and pictures of John Deere tractors, pigs and horses dot his walls.

He noted several times he has heard about rural communities overpaying for projects because of the prevailing wage law. In most of those cases, he said, local contractors perform services on private projects for less than the prevailing wage rate but abide by the prevailing wage rate on public projects.

Love noted a September 2014 incident where hail damaged the roof of a residential house that had been converted into a storage center for the Cedar County Ambulance District. Typically it would cost $20,000-$24,000 to repair a home of this size, the district told Love. Because it was a public project, though, prevailing wage pushed the cost to $63,205.

Love also worked as a carpenter when he ran a small construction company in the 1970s and 1980s near his home in Cedar County. He never employed more than four people, but paid workers per project instead of per hour.

This session, Love introduced a bill proposing the repeal of prevailing wage for the fifth straight year. He believes this may be one of the biggest labor reforms in recent memory.

"Right to work was important, but this prevailing wage deal is an even bigger deal than right to work," Love said.

A spokesman for Greitens could not be reached for this article. During his State of the State address in January, the governor called for the repeal of prevailing wage in Missouri.

"We must do away with expensive project labor agreements that drive up the costs of construction and slow down important projects in our communities," Greitens said. "It hurts rural workers. It sets back rural families."

Despite the concerns of carpenters like Wilson and Shannon, Love thinks the repeal would create jobs statewide.

"This would be a job-creation bill," Love said. "We've got workers in these rural counties that will be willing to do them for public works and work for a lesser rate, and yet it's an increase to them. It's the local people who currently would love to have the work."

If the bill fails to pass, he plans to file it again next year.

Economists are split on the impact of prevailing wage laws.

A 2016 University of Missouri-Kansas City study funded by construction groups estimated the law's repeal would cost the state $6.5 million to $10.4 million in lost income tax revenue. The study also said the state would lose an additional $2.3 million to $3.7 million in sales tax revenue and cost Missouri families between $216.5 million and $346.6 million in lost income.

A 2001 Harvard University study claimed the effects of repeal were more moderate. Construction wages tended to decrease 2-4 percent in states that repealed prevailing wage laws, according to the Harvard study. Still, the effects on the construction industry were small but significant for union members in particular.

"The negative wage effects are borne primarily by union workers and white workers," the study said. "However, the effects of repeal differ substantially across groups of construction workers."