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The Benefits of Prevailing Wage
When we speak of prevailing wage, it is the compensation that construction workers on publicly funded construction projects receive on an hourly basis which is a local market-based minimum wage. And besides the hourly rate, workers are also given hourly fringe benefits which the employer can give out as cash payment or give out as benefits like retirement funds or insurance for the workers. And when there is a prevailing wage, workers are benefitted. There will be more jobs for local workers and it will result in a stronger economy and public works which are of higher quality. The reason why the prevailing wage is implemented is so that contractors will not make the cost of the project very low at the expense of the daily wages of construction workers.
So what are the benefits of prevailing wage?
With the prevailing wage, there will be more skilled workers who will be employed in public construction projects. This will then make the construction of public structures much faster which benefits the community as a whole. The reason for this is that more skilled workers will make themselves available because prevailing wage and the accompanying fringe benefits are very attractive to them.
When there is a prevailing wage, the incomes of construction workers is increased by a certain percentage. And so, much of those in poverty will rise up to become members of the middle class with the kind of wages they are receiving. This helps grow the middle class of society. And construction workers who were living in poverty will now be able to raise their living standards according to the wages and benefits that they receive. They will no longer be at the mercy of unscrupulous contractors who bids low of the project and makes their workers earn a meager income.
With the fringe benefits attached to prevailing wage, more and more construction workers will avail of health insurance. With health insurance, the quality of life of construction workers will be a lot better.
Prevailing wage also increases apprenticeship training. More and more would-be workers are doing apprenticeship training in construction projects. When one is trained, then one can work as a skilled construction worker which will help increase their lifetime earnings.
There are some employers who would rather give the benefits part of the prevailing wage in cash. This means that the hourly rate of the construction worker will increase. However, this is detrimental to the employer since he will have to pay payroll taxes and if the payroll increase, then taxes will also increase. Whereas if he gives the other half of the prevailing wage as fringe benefits, then no tax will be collected on these benefits. The worker will get fringe benefits in terms of a retirement fund or health insurance while the employer does not have to pay taxes on these.
These are the benefits of prevailing ager to workers. They earn a fixed hourly rate which is much higher than what most contractors will pay. And they have the added benefit of having a retirement plan or health insurance as well.