A Prevailing Wage Bill With Consequences Far Beyond Construction

(This article first appeared in Broad+Liberty)

y Warren Hudak

The Pennsylvania Senate’s passage of Senate Bill 908 has largely been discussed as a construction and labor issue. In reality, its effects could extend far beyond public works projects and into the broader economy, particularly for small businesses and manufacturers already struggling with workforce shortages and rising costs.

The legislation expands prevailing wage requirements to certain off-site custom fabrication and assembly work performed in connection with public projects. Supporters argue the bill closes a loophole and ensures workers contributing to public projects receive prevailing wage protections regardless of where components are produced. Opponents worry it represents a significant departure from a longstanding principle of Pennsylvania labor policy: wages should reflect the labor market where work is performed.

Senate Bill 908 raises an important question: Should compensation for work performed in one community be influenced by the location of a public project in another?

The debate is not about Philadelphia. Philadelphia is an essential economic engine for the Commonwealth and a critical source of jobs, investment, and opportunity. The concern is whether wage rates associated with projects in one labor market should influence compensation requirements for work performed in a very different labor market.

Consider a fabrication facility in York County producing custom components for a public project located in Philadelphia. Supporters of the bill would argue those workers deserve the same prevailing wage protections associated with the project. Critics would argue that compensation should continue to reflect the labor market where the fabrication occurs, not where the finished product is ultimately installed.

That distinction matters because the economic effects do not stop at the public project.

Manufacturers, machine shops, HVAC contractors, trucking companies, distributors, and fabricators compete every day for the same skilled workforce. Welders, electricians, mechanics, maintenance technicians, CDL drivers, and machinists are already among the hardest positions to fill across Pennsylvania. When government policy increases wage pressure in one segment of the labor market, competing employers inevitably feel the impact.

Unlike government-funded projects, however, private employers cannot simply pass higher labor costs on to taxpayers.

A family-owned machine shop in York competes not only with local employers but with firms in Ohio, Indiana, Tennessee, North Carolina, and other states actively recruiting manufacturers and skilled workers. If labor costs rise because wage expectations are increasingly influenced by public-project compensation levels rather than local market conditions, businesses face difficult choices: increase prices, reduce hiring, postpone expansion, delay capital investments, or absorb lower profits.

None of those outcomes strengthen Pennsylvania’s competitiveness.

The ripple effects extend throughout the economy. Higher labor costs increase production costs. Higher production costs contribute to higher prices. Delayed investment slows growth. Workforce shortages become more severe. Taxpayers ultimately bear both the direct cost of more expensive public projects and the indirect cost of inflationary pressures spreading through regional economies.

Supporters of Senate Bill 908 believe the legislation promotes fairness and prevents contractors from avoiding prevailing wage requirements through off-site fabrication. That perspective deserves consideration. Workers should be compensated fairly, and public contracting rules should be transparent and consistently applied.

But lawmakers should also consider the broader economic consequences. Pennsylvania already faces demographic challenges, workforce shortages, rising healthcare costs, and intense interstate competition for investment. Policies that increase labor costs beyond the immediate public project can have consequences that reach manufacturers, suppliers, distributors, and small businesses that were never intended to be affected.

The debate over Senate Bill 908 is ultimately not about construction. It is about whether Pennsylvania will continue to recognize the importance of local labor markets or move toward a system where wage pressures increasingly follow the location of a government project.

That may sound like a technical policy change. For small businesses across Pennsylvania, it could become a very expensive one.

After a distinguished U.S. Naval career and with more than 20 years of accounting and business consulting experience, Warren S. Hudak formed Hudak & Company to provide a strategic perspective to the accounting relationship. As a leader in the firm’s tax, accounting, and consulting service areas, he provides advice on accounting, tax, and other planning issues to a diverse group of closely held businesses.