Prevailing wage is a government-mandated minimum pay rate for workers on public projects, set by federal or state agencies based on local wage surveys. Union wage, on the other hand, is negotiated through collective bargaining agreements between unions and employers. While prevailing wages may reflect union rates in some areas, they are not the same, and contractors must follow prevailing wage laws regardless of union affiliation.
Many professionals in the construction industry wonder if prevailing wages are the same as union wages. This is mainly because it is an often misunderstood topic. At first glance, the two terms appear similar: both establish wage standards, provide labor protections, and directly influence worker compensation on publicly funded projects. In some cases, the rates may even align.
However, despite occasional overlap, prevailing wages and union wages are not the same. Misunderstanding the distinction can result in significant compliance issues, including underpayment, audit findings, or disqualification from future contracts.
What are Prevailing Wages?
Prevailing wage is the basic hourly rate of pay (plus fringe benefits) that contractors are legally required to pay workers on publicly funded construction projects. These rates are set by government agencies and reflect the standard pay for a specific trade in a specific geographic location.
Prevailing wages are mandated by law—either at the federal level through the Davis-Bacon Act, or at the state level through various "Little Davis-Bacon" laws. The goal is to ensure workers receive a fair wage that reflects local standards, regardless of whether the contractor is union or non-union.
How are Prevailing Wage Rates Determined?
For federal projects, the U.S. Department of Labor reviews wage data and determines the prevailing wage rates through surveys that gather data on wages and benefits paid to workers performing similar jobs in a specific geographic area. These wage rates are published on SAM.gov and are updated periodically.
The prevailing wage includes both the basic hourly pay rate and fringe benefits, such as health insurance, retirement contributions, and paid vacation.
Let's say the prevailing wage for a journeyman carpenter in Dallas, Texas, is $35/hour, plus $10/hour in fringe. Whether you're a large union contractor or a small non-union subcontractor, if you're working on a covered public project, you must pay your workers at least the basic hourly rate plus the fringe benefits for all hours worked under that classification.
Failure to do so can result in severe consequences, including back pay, contract termination, or even debarment from future public work.
What Is a Union Wage?
A union wage is the rate of pay negotiated in a collective bargaining agreement (CBA) between a union and an employer or group of employers. These agreements are legally binding contracts that also cover things like:
Work conditions
Overtime pay
Paid holidays and time off
Safety requirements
Retirement and health benefits
Union wages are typically determined at the local or regional level by trade unions like the International Brotherhood of Electrical Workers (IBEW), United Brotherhood of Carpenters, or Laborers' International Union of North America (LIUNA).
The key point is that union wages only apply to unionized contractors and their employees. If you're a non-union shop, you're not bound by a CBA—but you may still have to match the union's pay rates if those rates set the prevailing wage in your area.
Prevailing Wage vs. Union Wage: Not the Same, But Closely Linked
It's understandable that prevailing wages and union wages are often confused, as the terms are frequently used interchangeably despite having distinct definitions and applications. The confusion often stems from the fact that union rates frequently inform prevailing wage rates.
When a region is heavily unionized, wage surveys used to calculate prevailing wages often reflect union pay scales. In that case, the prevailing wage = union wage. So, even if you're a non-union contractor, you may still be required to pay union-level wages on a public project.
However, that's not always the case.
In right-to-work states or areas with a strong non-union workforce, prevailing wages may be based on open shop rates, which can be significantly lower than union wages. That's why assuming the two are always equal is a risky move.
Side-by-Side Comparison
Let's compare prevailing wage vs. union wage more directly:
Category |
Prevailing Wage |
Union Wage |
Who sets it? |
Government agencies (federal or state) |
Trade unions via collective bargaining |
Who must follow it? |
All contractors on public projects |
Only union contractors with a signed agreement |
Includes benefits? |
Yes, typically includes fringe benefits |
Yes, detailed in union contracts |
Source of data |
Local wage surveys, sometimes influenced by unions |
Internal to the union-employer agreement |
Flexibility |
Set for each project; rarely changes mid-contract |
Can be renegotiated when CBAs expire |
Compliance requirement |
Legal requirement under Davis-Bacon or state law |
Contractual obligation between employer and union |
Real-World Example
Imagine a general contractor wins a state-funded project in Illinois, where the prevailing wage for heavy equipment operators is $55/hour with $20/hour in benefits. This prevailing wage was set based on local union wage data because most operators in the region are unionized.
A non-union subcontractor brings in operators they usually pay $42/hour plus limited benefits. If they use their standard pay scale on this project, they'd be violating state prevailing wage laws. The contractor is still responsible for ensuring those workers receive at least $75/hour in total compensation, or they'll be liable for restitution and potential penalties.
Why This Difference Is Critical for Contractors
Not knowing the difference between prevailing wage and union wage can result in more than just financial penalties—it can damage your reputation, delay project payments, and prevent future bids.
For example:
Bidding too low by underestimating prevailing wages could cost your firm profitability or even the job itself.
Incorrect certified payroll submissions.
This is especially true for contractors working across multiple states, where wage laws, fringe benefits, and classifications vary widely. In one state, prevailing wage may mirror union wages exactly. In another, it may differ by $10-$15/hour.
Summary: Are Prevailing Wages the Same as Union Wages?
No, they are not the same. Prevailing wage is a government-mandated minimum wage for public projects, while union wage is a negotiated rate in a private labor contract. They may sometimes align, especially in heavily unionized areas, but assuming they're always equal is a mistake.
Understanding the difference between prevailing wages and union wages is essential for accurate job costing, maintaining legal compliance, processing payroll correctly, and ensuring the successful execution of publicly funded projects.
Stay Compliant with eMars
At eMars, we specialize in making complex compliance requirements simple. Whether you're navigating Davis-Bacon or state prevailing wage laws, we help contractors check compliance against the correct wage rates, automate certified payroll submissions, and avoid errors that could result in costly audits.
With a platform built for contractors, subcontractors, and public project administrators, we take the guesswork out of compliance, so you can focus on what you do best: building.
Ready to simplify your prevailing wage reporting? Get in touch with eMars today to see how we can help your team stay ahead.