The Complete Prevailing Wage Guide: Info, FAQs, Resources, and State Details for 2024

Need to understand prevailing wages to keep your company and its workforce compliant? Our detailed guide has everything to get you started!

Laws surrounding prevailing wages mandate contractors and subcontractors must pay workers a predetermined hourly rate for specific trades in a given area when working on applicable public works projects.

Prevailing wage laws exist to ensure fair compensation for labor, maintain standards of living for workers, and prevent undercutting wages in government-funded projects. Understanding the prevailing wage is essential for employers, contractors, and workers to avoid severe penalties, legal issues, and tarnished reputations. 

This comprehensive guide will explore prevailing wage regulations, including their definition, purpose, and practical implications. By the end of this article, you’ll gain a thorough understanding of prevailing wage laws and the skills needed to navigate them effectively. You’ll learn:

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Understanding Prevailing Wage

A prevailing wage encompasses the hourly wages, benefits, and overtime paid to most workers, laborers, and mechanics employed to complete applicable public works projects within a particular area. Prevailing wage rates are usually determined by the government – typically at the state or federal level, depending on the laws in place. 

This wage is established through surveys conducted by the government or independent bodies to determine the typical wages paid for job classifications in a certain area. It serves as a benchmark to ensure workers on publicly funded projects receive fair compensation comparable to what is “prevailing” in the local labor market.

The History of Prevailing Wage Laws

The roots of prevailing wage laws in the United States can be traced back to the Great Depression. 

Amidst widespread unemployment and economic turmoil, the federal government implemented the Davis-Bacon Act in 1931. Named after its sponsors, Senator James J. Davis and Representative Robert L. Bacon, this legislation aimed to protect local wage standards and shield local workers from being undercut by contractors employing cheap labor from other regions.

The Davis-Bacon Act of 1931

In August of 2023, the U.S. Department of Labor recently updated prevailing wage rules for the construction industry, which are expected to result in higher worker compensation rates.

Ordinary Wages vs. Prevailing Wages: What’s the Difference?

How Prevailing Wages are Determined

The process of determining prevailing wages includes carefully analyzing the typical pay rates and extra benefits in a given location for different types of jobs. This process ensures workers on publicly funded construction projects receive fair compensation and that contractors compete on a level playing field. 

Here’s a step-by-step overview of how they’re determined:

Data Collection

Government agencies or independent bodies collect wage rates and fringe benefits data from union agreements, employer surveys, and wage databases.

Classification of Jobs

The collected data is categorized into specific job classifications based on trade, skill level, and type of work performed. This classification ensures that prevailing wage rates are tailored to the responsibilities of each specific role.

Statistical Analysis

Once the data is collected and classified, specialists will analyze the wage rates, find the median and average wages, and determine prevailing rates for each job classification.

Public Input and Review

Sometimes, government agencies may solicit public input or conduct hearings to gather feedback from stakeholders, including employers, workers, and industry associations. This input helps ensure prevailing wage determinations accurately reflect local labor market conditions.

Publication of Rates

After completing the analysis and review process, prevailing wage rates for each job classification are published and made available to contractors, subcontractors, and government agencies responsible for awarding public contracts.

Periodic Updates

Prevailing wage rates are periodically updated (typically once a year) to reflect labor market conditions, inflation, and other factors affecting wage trends. This ensures that prevailing wages remain current.

The Role of Government Agencies

Government agencies, such as the US Department of Labor and state agencies, play a central role in setting prevailing wages and overseeing compliance with prevailing wage laws. These agencies are responsible for the above-mentioned process, including collecting and analyzing data, determining prevailing wage rates, and enforcing compliance with prevailing wage requirements.

State vs. Federal Prevailing Wage

The prevailing wage landscape in the United States is characterized by a complex dynamic between state and federal regulations.

Federal prevailing wage laws, such as the Davis-Bacon Act and the McNamara-O’Hara Service Contract Act, apply to federally funded construction and service contracts. However, many states have enacted prevailing wage laws with varying provisions and coverage. 

The Difference Between State and Federal Regulations

Several states have implemented their prevailing wage laws, which may differ from federal standards regarding coverage, wage rates, and enforcement mechanisms. Let’s take a look at a few examples.


California’s prevailing wage law is outlined in California Labor Code Sections 1720-1861. Under this law, contractors and subcontractors working on public works projects must pay their workers the prevailing wage rate determined by the California Department of Industrial Relations

Prevailing wage rates vary by county and are based on the rates established by collective bargaining agreements or surveys of wages paid in the locality. The law applies to construction, alteration, demolition, installation, or repair work under public agency contracts.

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New York

New York’s prevailing wage law, outlined in New York Labor Law Article 8, requires contractors and subcontractors working on public works projects to pay their workers the prevailing wage rate set by the state’s Department of Labor.

The law covers construction, reconstruction, maintenance, and repair projects undertaken by or on behalf of public entities, including state agencies, municipalities, and public authorities.


In Illinois, the prevailing wage law is outlined in 820 ILCS 130/1 et seq.

This law mandates contractors and subcontractors working on public works projects funded by state or local government agencies pay their employees the prevailing wage rates determined by the Illinois Department of Labor. Covered projects include construction, repair, remodeling, or demolition work under contract with public bodies, including state agencies, counties, municipalities, and school districts.

Challenges For Contractors 

When state and federal prevailing wage laws differ, contractors and workers may encounter the following challenges:

How to Navigate Overlaps Between State and Federal Regulations

Businesses can take several proactive measures to navigate conflicts or overlaps between state and federal prevailing wage regulations.

The Impact of Prevailing Wage Laws

Prevailing wage laws have far-reaching implications for workers, employers, and the economy as a whole.

Impact on Workers

Impact on Employers

While prevailing wage laws benefit workers by ensuring fair compensation, they can also impact employers and project costs in various ways.

Impact On the Economy

Prevailing wage laws have broader economic implications beyond their impact on individual workers and employers.

Compliance and Strategies

Ensuring compliance with prevailing wage laws is essential for contractors and employers operating in industries governed by these regulations. 

Requirements for Contractors and Employers

Compliance with prevailing wage laws involves adhering to various requirements to ensure workers are paid fair wages and benefits on publicly funded projects.

How to Manage Costs While Staying Compliant

While compliance with prevailing wage laws can lead to additional costs for contractors and employers, there are several strategies that businesses can employ to manage costs effectively.

Benefits of Complying with Prevailing Wage Regulations

While compliance with prevailing wage regulations may present challenges for contractors and employers, there are significant benefits, too.

The Bottom Line on Prevailing Wages

Prevailing wage laws play a vital role in protecting fair compensation, promoting labor standards, and fostering economic growth in the construction industry and beyond.

By establishing minimum wage rates for workers on publicly funded projects, these laws ensure workers receive fair pay and benefits in line with local labor market conditions. Additionally, prevailing wage laws help level the playing field for contractors bidding on public projects, prevent wage undercutting, and promote quality, safety, and accountability in construction work.

Understanding and navigating state and federal prevailing wage regulations is essential for contractors, subcontractors, and workers in multiple jurisdictions. While state prevailing wage laws may vary in coverage, wage rates, and enforcement mechanisms, they often complement and reinforce federal standards, providing additional protections for workers and promoting consistency and fairness in labor practices.

Check out the articles below for further reading and resources on labor law compliance.

As you move forward, we encourage you to stay informed, engaged, and proactive in your approach to prevailing wage compliance. By prioritizing fair wages, labor standards, and regulatory compliance, you can contribute to a more equitable, sustainable, and prosperous future for workers, businesses, and communities.

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