Build Back Better vs. Small Business

Wage mandates for green subsidies will squeeze nonunion shops

WSJ editorial. 

"We’ve been telling you about special political favors hidden throughout the Democratic spending bill—subsidies for the press corps, the trial bar and green energy. But the biggest single winner may be Big Labor, and one egregious example is the wage mandate for contractors that would lock out small business.

The Build Back Better Act the House passed last month includes $555 billion in grants, credits and deductions for green-energy projects. It also has requirements for any contractor hoping to line up for that cash. Take the tax deduction for retrofitting commercial and apartment buildings. To qualify for a job installing efficient lighting or windows, contractors must pay employees the “prevailing rates.”  

That doesn’t mean merely the minimum wage or whatever the going rate is for construction in a region. The prevailing wage refers to pay rates that the Labor Department sets for jobs in a given industry. These wages exceed market rates and are generally paid to government contractors or direct recipients of federal loans and grants. But Democrats want to apply them to any job tied to their new raft of green spending.

The pay premium is no pittance. For example, the Labor Department requires that an electrician in middle-class Orange County, N.Y., earn a prevailing wage of $47 an hour. That’s 70% above the national median, according to the U.S. Bureau of Labor Statistics, and it’s well beyond what most local contractors pay.

This is a sop to unions, which have a hard time organizing the smaller companies that dominate the building and repair industry in most of the U.S. Most workers in these industries aren’t unionized. Building-trade unions lobby for prevailing-wage mandates to make sure union contractors don’t have to contend with family and non-union shops that compete on price. The House bill requires prevailing wages for all sorts of subsidized activities, such as building charging stations for electric vehicles and upgrading marine fisheries.

All of this means that non-union contractors will be shut out of much of the spending blowout. Small contractors won’t be able to afford the higher wages. Costs will rise for consumers and many workers will lose their jobs. Democrats are building back more expensively, and only for companies that are their political allies."