Opinon piece in the Sacramento Business Journal

To make housing affordable, pay a fair wage

Robert L. Balgenorth

The crocodile tears being shed by developers about the new requirement to pay prevailing wages on all California construction using public funds (“Rental builder plans big ’03/But then it’ll halt low-end units; wage law cited,” news story, Page 1, Nov. 8) is a combination of Chicken Little and P.T. Barnum.

The fundamental question remains: Why shouldn’t people who build affordable housing make enough money to live in affordable housing?

The new law, implemented by Senate Bill 975, requires prevailing wages to be paid when private projects receive taxpayer dollars. It prevents a developer from getting free public benefits on one hand and then paying local workers (taxpayers) the lowest possible wage on the other.

We think working families should also share in government-sponsored redevelopment. To allow programs that receive public assistance to pay substandard wages with no benefits only ensures that poorly paid workers will never be able to buy the home on which they work.

It’s good for California: For California, the critical issue is how the economy of the state and the standard of living for working families can be improved. It’s more than just paying better wages.

Prevailing wages also include health and pension benefits for families who would not otherwise have any way of paying for these long-term benefits. And it provides access to state-approved apprenticeship programs that give workers the lifelong skills needed for building new careers.

The failure to pay prevailing wages only ensures that the gap will widen in this state between those who can buy high-end housing and those who can barely afford to rent. It’s not only lousy public policy; it’s bad economics.

California’s population growth has created our housing shortage. We build only about 160,000 new units each year, while we need 220,000 units just to keep up.

But that’s not the full story.

Twenty years ago the median cost of a house was $134,000. Today it’s more than $323,000, a 141 percent increase. Wages, meanwhile, in real buying power, have been virtually flat for working families.

The portion of housing costs related to labor was about 11 percent in 1983, when most housing was built by union workers, paying prevailing wages. Labor costs haven’t increased as a percentage of total costs, while the payment of prevailing wages would increase residential construction labor costs by only about 3 percent to 5 percent.

Yet housing prices have nearly tripled, making home ownership almost impossible for most working families. The cost of labor and materials hasn’t tripled, so where did the money go? Check out the pockets of the builders.

No significant gain in construction costs: Scores of studies have examined the impact of the payment of prevailing wages and benefits throughout the United States and in California. All of the studies have found that:

  • The payment of prevailing wages (living wages) does not increase the cost of construction significantly, if at all.
  • In fact, the payment of prevailing wages often reduces costs because of the increase in productivity, the decrease in job-site injuries, and fewer construction defects.
  • Where prevailing wages are paid, apprentice training programs are more prevalent, including higher participation by minorities and disadvantaged workers. This training translates into much higher job quality, reducing future maintenance costs.
  • The failure to pay prevailing wages and benefits creates a direct cost to taxpayers because it shifts the cost of healthcare and pensions from employers to public health systems.We believe that paying prevailing wages and benefits reverses the spiral to the bottom of the economic ladder, and gives working families a way to climb the ladder to economic security. Like the tide, prevailing wages raise all boats.

Robert L. Balgenorth is president of the Building and Construction Trades Council of California, which is based in Sacramento.