Dive Brief:

• The Trump administration's $1 trillion infrastructure proposal will include mandated prevailing wage rates, according to The Hill.
• Transportation Secretary Elaine Chao said the program will utilize the standards set forth in the Davis-Bacon Act, which has dictated how much workers on federal projects are paid since 1931. Chao said the inclusion of wage protection was necessary to bring Democrats into the fold on the president's infrastructure plan.
• Republicans have expressed concern that prevailing wages increase costs and have offered up legislation for various infrastructure initiatives that exclude their use.

Dive Insight:  

Prevailing wage rates are often higher than contractors, especially smaller ones, would normally pay. Advocates of prevailing wage say it levels the playing field during the bidding process, keeping contractors from lowering wages as a way to trim the overall cost of the project. Opponents, on the other hand, argue that the union wages used as the regulation's benchmark don't always fall in line with regional pay rates.

Last year, National Association of Home Builders First Vice Chairman — now Chairman — Granger MacDonald testified before the House Financial Services Subcommittee on Housing and Insurance that Davis-Bacon prevents smaller construction firms from competing for some federally funded projects.

Chao's indication that Trump's massive infrastructure plan will include Davis-Bacon wage rates is sure to draw pushback from Republicans and many construction industry groups, such as the Associated Builders and Contractors, who have consistently lobbied for the repeal of the measure.

The elimination of prevailing wage and other labor regulations has become increasingly common in states that see them as obstacles to increased business investment.

For example, earlier this year, Kentucky passed a bill that will eliminate the requirement that contractors pay prevailing wage rates on state-funded projects. Missouri is the most recent state to take on union-friendly regulations. At the end of last month, Missouri Gov. Eric Greitens signed a bill that bans state and local governmental agencies from mandating project labor agreements (PLAs) on state-funded construction projects.

Proponents of PLAs maintain that they benefit both nonunion and union workers, as they allow unions to negotiate higher wages for workers from both camps. In addition, some private developers also choose to enter into PLAs so that they can rely on the participating unions' contractual commitment to provide a consistent supply of qualified workers, which could be considered a smart business move in this environment of skilled-labor shortages.

And earlier this year, Missouri also joined Kentucky and 26 other states in enacting right-to-work legislation, which prevents any requirement that forces nonunion workers to pay union dues, even when working on union projects.