Morning Must Reads: Job Creators Love the Prevailing Wage and Predatory Payday Lenders Are Lousy Job Creators

Is the prevailing wage just a battle between business and labor? James Gaffney explains why it isn't in the Harrisburg Patriot-News this morning.

Recent anti-prevailing-wage articles paint the picture of a classic business versus organized labor dispute. It's not.

Recently, I testified at a House hearing on behalf of construction contractors who support prevailing-wage law. That's right, "contractors, employers, job creators" who support it.

And, it's not just contractors who use union labor. Three of the five who testified are owners of nonunion construction companies.

We testified that the rates we pay are in line with the wage rates prescribed by the prevailing-wage law. That's why it's called "prevailing wage."

So, if the dispute isn't a union versus non-union fight, what's it really about? It's a battle between low-wage contractors and contractors who pay good wages and benefits. The Prevailing Wage Act establishes a minimum wage for work on publicly financed construction projects. It's necessary because those projects are awarded on a low-bid basis. Without the law, some contractors attempt to be the lowest bidder by paying workers as little as possible.

Representatives of the payday lending industry make an appearance in the Bucks County Courier Times this morning arguing that House Bill 2191 would offer Pennsylvania consumers a better product and create some jobs that pay $50,000 a year! As I explained Tuesday morning, the bill would legalize more predatory payday lending in Pennsylvania than currently exists costing consumers hundreds of millions in excessive fees. Those excessive fees are why payday lending will on a "macro level" destroy about as many jobs as its supporters claim it will create. 

And what about those jobs paying $50,000 a year! Industry talking points that Axcess Financial has shared with lawmakers stipulate that if HB 2191 were passed the industry would pay $63 million in salaries in Pennsylvania to over 2,000 workers. The math-inclined among you will note that means the average job will pay $31,500 a year. More precise job numbers from earlier industry talking points put the average salary closer to $25,000.

So how good are jobs in the payday lending industry? According to filings with the Securities Exchange Commission (SEC), Advance America, the nation's largest payday lender, reports that non‐managerial turnover at its storefront locations was 120%, with more than half of that turnover occurring within six months of employment. Among storefront managers, the annual turnover rate was 58%. As we explain here, HB 2191 would swap average jobs for pretty lousy jobs. (Data on turnover at Axcess Financial is not available because it is a private company.)

State Rep. Frank Farry, R-142, co-sponsored the lending bill, which he called a “consumer protection measure.” Worse loan programs are being offered to Pennsylvania via other countries and states, he said.

“You can get these loans by crossing the border into Ohio,” said Farry. “You can get these loans online through Costa Rica. This is an attempt to gain some control over that.”

One such company, the California-based Online 1-Hour Loan said it connects borrowers to banks where fees “typically range from $15 to $25 per $100 borrowed for 1 to 15 days or more.”

Lenders can pay an “APR from 260% to 521% or higher,” according to the company. “Other consumers may pay an APR as high as 782%.”

Online 1-Hour Loan said users can borrow up to $1,500 and must make “at least $1,000 per month.” “Bad credit will not prevent you from getting a loan,” according to the website...

Axcess Financial offers short-term lending services in more than a dozen states and could someday expand into Pennsylvania, said [John] Rabenold, a company spokesman.

“Obviously, people in Pennsylvania are being offered short-term loans, and we believe we can offer residents of Pennsylvania a better product,” Rabenold said. “On a macro-economic level, this legislation will also employ about 2,000 plus people in Pennsylvania and these are going to be some high quality jobs.”

Some in the industry are managers making about $50,000 per year, Rabenold said. He declined to speculate on average salary of Axcess employees.


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