Prevailing wage is a legally required minimum pay rate for workers on public construction and service contracts, set separately from the regular minimum wage and typically much higher. Here's how it's determined, and when it applies.
What Is Prevailing Wage?
It's the minimum hourly wage (and often benefits) that contractors and subcontractors must pay workers on certain government-funded projects, determined by surveying what's actually paid for similar work in that local area. Unlike the standard minimum wage, which is a flat floor, prevailing wage rates vary by location, trade, and project type, and are usually well above standard minimum wage.
The Davis-Bacon Act of 1931 requires contractors and subcontractors on federal construction contracts over a set dollar threshold to pay laborers and mechanics no less than the locally prevailing wages and benefits for corresponding work.
When Does Prevailing Wage Law Apply?
Federally, prevailing wage requirements come mainly from the Davis-Bacon Act, which applies to federal construction contracts over a certain dollar threshold, and the related McNamara-O'Hara Service Contract Act, which covers federal service contracts. Many states have their own "little Davis-Bacon" laws extending similar requirements to state and local public works projects.
How Are Prevailing Wage Rates Determined?
The Department of Labor (or a state's equivalent agency) surveys wages actually paid to workers in a specific trade (electrician, carpenter, laborer, and so on) within a specific geographic area, then sets the prevailing rate based on that data. Rates are published by trade and county or region, and can change as new wage surveys are conducted.
Prevailing Wage vs. Minimum Wage
Minimum wage is a single, legally mandated floor that applies broadly to nearly all covered employment. Prevailing wage is narrower in scope, applying only to covered public contracts, but typically sets a much higher rate than the general minimum wage for the specific trade and location involved. A worker on a covered federal construction project is entitled to the prevailing wage for their trade even if it's several times higher than their state's standard minimum wage.
Who Has to Pay Prevailing Wage?
Contractors and subcontractors performing covered work on federal construction contracts above the Davis-Bacon Act's dollar threshold, federal service contracts covered by the McNamara-O'Hara Service Contract Act, and, in many states, state or local government contracts covered by a parallel state prevailing wage law. Private employers not working on a covered public contract are not subject to prevailing wage requirements, only to the standard minimum wage that otherwise applies.
What Happens If a Contractor Doesn't Pay Prevailing Wage?
Contractors found to have violated prevailing wage requirements on a covered federal contract can be required to pay back wages to affected workers, and in serious cases can be barred from bidding on future federal contracts for a period of time. Enforcement is typically handled by the same Wage and Hour Division that enforces the FLSA's minimum wage and overtime rules.
Frequently Asked Questions
What is the difference between minimum wage and prevailing wage?
Minimum wage is a general legal floor for nearly all covered employment. Prevailing wage applies only to specific government contracts and is based on local wage surveys by trade, usually resulting in a much higher required rate.
Does prevailing wage apply to private construction projects?
No, unless the project itself is a covered public contract. Purely private construction work is subject to standard minimum wage law, not prevailing wage requirements.
Who sets prevailing wage rates?
The US Department of Labor sets federal prevailing wage rates under the Davis-Bacon Act; many states have their own labor agencies that set state-level prevailing wage rates for state-covered contracts.
How often do prevailing wage rates change?
They can change whenever a new wage survey is conducted for a given trade and area, which happens on an ongoing basis rather than a fixed annual schedule.
See the general minimum wage rules that apply outside of public contracting in our federal minimum wage guide, or check your state's standard minimum wage. For official Davis-Bacon Act rates, see the Department of Labor's wage determinations database.