See also: “A How-To Guide for Strengthening State and Local Prevailing Wage Laws: Raising Standards for Government-Funded Work”
See also: “Prevailing Wages: Frequently Asked Questions”
Nearly all states and many cities set minimum wages for private sector employees operating within their jurisdictions. These laws are essential, as they particularly help the most vulnerable workers and ensure that pay does not fall below certain thresholds. But in this era of extreme economic inequality and concentrated economic power, many states and cities want to do more to improve conditions for working people—and they have the authority to do so.
There is one particular underutilized tool that states and cities should consider using as a complement to their universal minimum wage laws: the enactment of industry-specific, prevailing wage-style laws that apply to private sector employees. Under this approach, minimum compensation standards are set with reference to prevailing wage and benefit rates.
Setting standards based on what some employers in the industry pay is widespread in government contracting, where prevailing wage laws are common.1 But in several cases, prevailing wage-style laws have also been used to regulate private businesses that are not working on contracts or other government-funded or subsidized projects. The authors call this type of industry-specific wage law a prevailing industry standard.
Prevailing industry standard laws can build upon traditional minimum wage laws by stabilizing wages and benefits above bare minimums so that jobs can be sufficient to meet workers’ basic needs. For example, in Washington, D.C., in 2020, all security guards in commercial office buildings must receive at least $21.17 per hour in combined wages and benefits, well above the citywide minimum wage of $15 per hour.2
At the same time, prevailing industry standards can ensure that high-road employers—those paying good wages and benefits—are not undercut by low-road businesses competing on the basis of submarket wages. Prevailing industry standards can protect gains that workers have been able to make toward achieving family-supporting compensation and prevent them from being undermined. Laws that protect industry standards can also deliver good outcomes for taxpayers by increasing income tax contributions and reducing poverty and reliance on public assistance.3 Moreover, industrywide wage-setting is proven to reduce pay gaps across race and gender.4 Finally, unions are often supportive of setting standards based on prevailing industry compensation levels. This is important because supporting unions is a critical step toward addressing key problems in the U.S. economy and democracy.5
This issue brief discusses three existing examples of industrywide prevailing standards laws that cover security officers, building service employees, and apprentices on construction projects. In addition, it describes how policymakers can adopt these types of policies in conjunction with other strategies to lift wages and benefits. By adopting prevailing industry standard laws, policymakers can take important steps toward stabilizing wages and benefits at family-sustaining levels and ensure businesses are competing on a more level playing field.
Where prevailing standard laws are being implemented
Several cities and states use prevailing industry standard laws to ensure high standards in private sector employment. Though use of these policies has been relatively limited so far—and some were passed due to very specific circumstances such as the desire to limit security guard turnover in Washington, D.C., in the aftermath of 9/11—the concept holds promise for much broader applicability. Existing laws in Washington, D.C., New York, and California serve as examples of what is possible in this space.
Security officers at commercial office buildings in Washington, D.C.
Since 2008, the District of Columbia has required all security officers working in commercial office buildings in the city to be paid at least the total compensation—wages and benefits—that prevails in the sector.6 In justifying the law, the Council of the District of Columbia stated:
Any wage that is not sufficient to provide adequate maintenance and to protect health impairs the health, efficiency, and well-being of persons so employed, constitutes unfair competition against other employers and their employees, threatens the stability of industry, reduces the purchasing power of employees, and requires, in many instances, that their wages be supplemented by the payment of public moneys for relief or other public and private assistance.7
Because of the law, as of June 2020, District of Columbia security officers are entitled to at least $16.69 per hour in wages plus an additional $4.48 per hour in benefits or their cash equivalent.8 Meanwhile, the citywide minimum wage just recently increased to $15 per hour.9
Building service workers at energy generation facilities in New York
In 2020, the state of New York passed legislation requiring that building service employees at major active energy generation facilities or at critical infrastructure transmission or distribution facilities be paid at least the prevailing wage and benefit rate.10 Among the justifications for the law is that it can help ensure the security of critical infrastructure by reducing turnover and allowing for a more developed and trained workforce.11 The law can help ensure that service jobs at these facilities pay family-sustaining wages and benefits. In New York County, for instance, the prevailing wage for building cleaners is $27.25 per hour plus $13.33 per hour in supplemental benefits.12
Registered apprentices on private construction projects in California
Policymakers in California have also applied prevailing standards to construction projects that are not subsidized by the government. One California regulation, for example, set a total compensation standard for registered apprentices on private construction projects based on the state prevailing wage law.13 The 9th U.S. Circuit Court of Appeals upheld the law against a preemption challenge.14
Referencing prevailing wage and benefit statutes has allowed policymakers in these areas to set minimum wages and benefits in specific sectors at levels above the bare minimum, ensure that high standards are not undercut, and encourage businesses to compete based on productivity rather than low wages. The success of existing policies may demonstrate their value for more widespread adoption.
Guidance for policymakers looking to implement these laws
States—and cities with sufficient home-rule authority—should adopt prevailing industry standards as part of a multipronged approach to setting high standards for workers. Cities and states should cover all workers in their jurisdictions with minimum wage laws and then strengthen these laws by passing prevailing industry standards to ensure workers receive fair compensation given their particular industry. That is, workers should receive either the universal minimum wage or the wages and benefits that prevail in their industry or occupation—whichever is higher.
Prevailing industry standard laws should also be adopted in conjunction with other sectoral approaches. When some employers in the industry already pay decent wages and benefits, prevailing industry standards can support high standards. But when market wage rates are low, sectoral-specific minimum wages or workers’ boards may be required.15 New York City, for example, requires that ride-hailing apps pay drivers $17.22 per hour after expenses, and Los Angeles law sets minimum wage and leave requirements for hotel workers citywide.16 Similarly, wage or workers’ boards—where representatives of workers, employers, and the public come together to set minimum standards for an industry or occupation—have been used to improve conditions for fast-food workers in New York state and domestic workers in Seattle.17 Workers’ boards can be particularly effective in industries with low standards because they can set high standards for compensation as well as for a wide range of issues, including safety and training.18 Beyond that, workers’ boards can help foster worker organizations, give workers a voice in determining workplace standards, and build worker power, potentially providing a pathway for workers to directly improve their working conditions in the future. As workers gain strength to improve conditions, workers’ boards can even look to prevailing compensation rates in setting their standards.
In short, prevailing industry standard laws are an important part of a series of overlapping minimum wage policies—including universal minimum wage laws and workers’ boards—that cities and states should adopt. State and local governments will need to carefully craft prevailing industry standard laws to survive potential legal challenges. The authors can help advise pro-worker advocates designing these standards.
Setting minimum workplace standards based on those that prevail in an industry and locality is an important way to strengthen minimum wage legislation. Prevailing industry standards can frequently lead to higher compensation levels than universal standards, prevent businesses that pay decent wages and benefits from being undercut, and protect the gains that workers have been able to make in achieving family-supporting compensation. These prevailing wage-style laws have been adopted by some cities and states and deserve wider use. Setting private sector minimums that reference prevailing market standards can benefit workers and high-road employers by lifting compensation, reducing turnover, and improving service quality.
David Madland is a senior fellow at the Center for American Progress. Malkie Wall is a research associate for Economic Policy at the Center. Alex Rowell is a former policy analyst for Economic Policy at the Center and a law student at the University of Michigan Law School.