Remodeling Kentucky's prevailing-wage policy

By Paul Kersey

Executive Summary

Kentucky's prevailing-wage law is a good deal for construction workers on state and local government projects. But it's a bad deal for taxpayers.

The statute defines the prevailing wage as the hourly amount, including base pay and fringe benefits, received by a majority of workers in the area where public projects, including schools, are being built. However, a lack of sufficient data that accurately reflects local communities' wages, along with methods used by the Kentucky Labor Cabinet to determine prevailing-wage rates, result in artificially high pay scales that add millions of dollars to public-construction costs.

The Legislative Research Commission (LRC) estimates the base wages of employees constructing public buildings are typically 24 percent more than the wages paid to workers with similar jobs on nonprevailing-wage projects. According to the LRC, these inflated wages added more than 7 percent or nearly $137 million to the cost of government construction across the commonwealth in 2002.

While the state Labor Cabinet uses the federal prevailing-wage designations in 39 Kentucky counties, it divides the remaining 81 counties into 20 localities that follow the borders of state Senate districts.

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