New York’s prevailing problem

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The smoke from Amazon’s tires as it peeled out of New York had barely cleared when Albany’s next bad-for-business measure started to pick up steam: expanding prevailing wage.

Prevailing wage is a requirement in state labor law that dictates how much construction companies must pay employees on “Public Work” projects.

Although it wasn’t included in the recently passed State Budget, legislation being discussed in Albany would dramatically expand the number of projects that would fall into the “Public Work” category. Under the proposal, building and construction work that relies on even a tiny amount of public funding or is conducted through local IDAs and LDCs would be required to follow prevailing wage regulations. By going down this road, Albany would establish greater government authority over what private companies pay their employees.

There’s a universal truth I’ve learned from 25 years running private-sector companies and 20 years in the state Assembly: When government gets involved, things cost more.

According to a 2017 report from the Empire Center, expanding prevailing wage would add 13% to 25% onto the cost of construction projects, depending on the region. This would be crippling to builders and businesses already facing a minefield of taxes, regulations and fees.

It’s a proposal that takes New York in the exact opposite direction in which we need to go. Our business climate is already infamously toxic. Consider where we stand in a few metrics:

• Tax Foundation: 2019 State Business Tax Climate – New York ranks 48th.
• CNBC: 2018 Top States for Business Friendliness – New York ranks 48th.
• 2018 Chief Executive Rankings – New York ranks 48th for Taxation & Regulation and ranks as the second-worst state in which to do business.

When Amazon scrapped its plans to locate its HQ2 headquarters and 25,000 jobs in Queens, it should have been a call to action. It should have prompted Albany to make immediate changes to the manner and mindset of how we treat job creators. Instead, some are intent to double-down on the “Tax-Fine-Harass” mentality that keeps costs high, keeps businesses away and keeps the state from reaching its true economic development potential.

Prevailing wage expansion will force companies to pay higher rates not just for public projects like bridges and tunnels, but for private projects so long as they have even a hint of a relationship with a public entity. The scope of this change cannot be overstated.

Private construction projects are an enormous economic stimulator. They create jobs, generate ancillary spending and drive growth. The detrimental impacts of prevailing wage expansion should disqualify it outright from consideration, yet it continues to gain momentum.

One group particularly at risk from this new plan is builders of affordable housing units. If required to cut back on projects as a result of the expansion, the ability of cities like Rochester to accommodate housing options for lower-income families would be severely hampered. The policy, like so many others proliferated by liberals in this state, will harm the very people it purports to help—the working poor.

Groups in opposition to the measure come from every corner of the state. Unshackle Upstate has rallied against higher construction costs and reduced employment opportunities, the National Federation of Independent Business expressed concerns it will harm businesses using certain loan and incentive programs. The NAACP fears it will negatively impact minority- and women-owned business enterprises as well as minority workers in the construction industry.

In Ulster County, the IDA had to abandon a two-year-long experiment with prevailing wage regulations, and the mayor of Yonkers called a similar pilot program “a dismal failure.” Simply put, it’s a bad policy.

Ironically, Gov. Cuomo has indicated he would be open to an exemption that would remove affordable housing construction from prevailing wage guidelines. Why would he do that? Because those critical projects become more affordable WITHOUT the prevailing wage cost driver.

This bill manages to harm the low-income earners who rely on affordable housing, middle-class business owners, local contractors and those who stand to benefit from a booming construction industry all in the same breath. One would think it would be difficult to accomplish such economic destruction all at once, yet the proponents of this bill make it look easy, almost effortless.

As a former small-business owner, I am gravely concerned with the direction in which this state is going, and bill proposals such as this do nothing to quell my concerns. Seemingly, there is no area of private or public life safe from this unmitigated attack on businesses in New York. Until the majorities in both houses and Gov. Cuomo start acknowledging local companies, business owners and job creators do not have unlimited resources to accommodate their misguided agenda, we will continue to destroy the foundation of our economy.

Simply put, bills like this are textbook examples of how to paralyze an economy.

Brian M. Kolb is the New York State Assembly Minority Leader.