What is a Prevailing Wage?

Where in the USA is Carmen Sandiego?

Imagine if instead of becoming a criminal mastermind, Carmen Sandiego instead chose more traditional work. Her love for traveling all over the country is still strong, so Carmen chooses to work all over the country. How does her travel impact her pay?

This is where a prevailing wage might come into play. Prevailing wage usually refers to the rate of pay that contractors and vendors must offer their employees when doing business with a government agency. For example, if Carmen decides to work in Minneapolis as a construction worker, the city requires Carmen to be paid a prevailing wage determined by the Minnesota Department of Labor and Industry. Or, if Carmen decides to work as a security guard providing government-contracted services in New York City, her wage would be set by the Office of the Comptroller for the City of New York.

When am I subject to Prevailing Wage?

Prevailing wages apply to employers with federal contracts subject to the Davis-Bacon Act, the Walsh-Healy Public Contracts Act (PCA), or the McNamara-O’Hara Services Contract Act (SCA) and to some state government contracts. Specifically, the Davis-Bacon Act dictates that all contractors or subcontractors hired for federal projects over $2,000 “must pay their laborers and mechanics no less than the locally prevailing wage and fringe benefits for corresponding work on similar projects in the area.” Prevailing wages typically exceed the federal or state minimum wage rates.

Additionally, roughly half of all U.S. states, as well as various municipalities, have their own specific prevailing wage laws. The federal government and these states and cities adopted prevailing wages to avoid situations where non-union employers or contractors could offer the lowest bid on a project by lowering employee compensation.

However, prevailing wages are not only applicable to direct government contracts. Legislators have enacted prevailing wage laws that set wages for a variety of government-funded work, including (but not limited to) direct government contracts, grants, loans, and tax incentives. Prevailing wage standards should also be applied to employees on service contracts at properties owned or leased by the government.

Author: Arwyn Robinson – SHRM CP

Sources: Minnesota Department of Labor and Industry, “Prevailing-Wage Information,” available at https://www.dli.mn.gov/business/employment-practices/prevailing-wage-information
Office of the Comptroller, City of New York, “NYC Service Contractors Prevailing Wage and Living Wage Schedule,” available at https://comptroller.nyc.gov/wp-content/uploads/documents/NYCServiceContractorsSchedule-2019-2020.pdf
U.S. Department of Labor, “Dollar Threshold Amount for Contract Coverage,” available at https://www.dol.gov/agencies/whd/state/prevailing-wages#:~:text=These%20States%20are%20Alabama%2C%20Arizona,2%2F%20California
Walter, Wall, and Rowell, “A How-To Guide for Strengthening State and Local Prevailing Wage Laws for Government-Funded Work.”

Prevailing Wage

Geographic Wage

Federal Contract Wage


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