Study finds Indiana common construction wage repeal reduced worker pay, didn’t save money on public works projects

Posted by National Alliance for Fair Contracting on

By Dan Carden
Jan 29, 2018

INDIANAPOLIS – When Gov. Mike Pence signed the 2015 repeal of Indiana’s common construction wage statute, the Republican proclaimed that eliminating county minimum pay rates for public works projects would save the state and local governments money without reducing the paychecks of Hoosier workers.

“Wages on public projects should be set by the marketplace and not by government bureaucracy,” Pence said at the time.

“By repealing the common construction wage, our state is putting hardworking taxpayers first, lessening the burden on cash-strapped local governments and schools, and opening doors of opportunity for small businesses across our state.”

Three years later, the first in-depth, non-partisan analysis of the impact of Indiana’s common construction wage repeal suggests that Pence was wrong.

The Midwest Economic Policy Institute, in a report provided exclusively to The Times, determined that following common wage repeal Hoosiers working in the construction industry are earning less than they were before, with no meaningful cost savings for Indiana taxpayers.

Worker pay, productivity decline

The institute used U.S. Department of Labor statistics for the four quarters preceding repeal of Indiana’s common wage, also known as the prevailing wage, and the four quarters after to determine how the policy enacted by the Republican-controlled General Assembly affected 10 market outcomes.

The study found that construction wages fell in Indiana by an average of 8.5 percent following repeal of the common construction wage, with the lowest-paid workers seeing their paychecks drop by 15 percent.

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EDITORIAL: Construction wage repeal needs review

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The Times Editorial Board
Jan 30, 2018

From acts of Congress to local government ordinances, lawmakers from all levels should be willing to put their codified policies to the test.

In that vein, the Indiana Legislature should push for an empirical review of the General Assembly’s 2015 repeal of the common construction wage statute.

Whether the law remains off Indiana’s books or put back on, the decision should be made on statistical evidence and hard data, not political ideologies.

In a recent report provided to The Times, the Midwest Economic Policy Institute concluded that following the common wage repeal, Hoosier construction workers earned less than they did before, with no meaningful cost savings for Indiana taxpayers.
The law had been seen by proponents as a sort of guaranteed minimum wage for construction workers.

Opponents of the ultimately repealed law, including former Gov. Mike Pence, argued eliminating the county minimum pay rates for public works projects would save the state and local government agencies money without reducing construction workers’ paychecks. Drawing on U.S. Department of Labor statistics for the four quarters before and after the law was repealed, the institute concluded Hoosier construction wages fell by an average of 8.5 percent after the repeal.

The lowest-paid workers saw their paychecks fall by an average of 15 percent, according to the institute.

Construction wages in neighboring Illinois, Michigan and Ohio, meanwhile, grew a combined 2.8 percent.

The institute also reported the repeal didn’t contribute to more competition for public works projects, among other findings, and thus didn’t lead to measurable savings.

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Guest Column: Protect prevailing wage to save jobs

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By Kevin Hertel, Special to Digital First Media
POSTED: 01/30/18, 3:35 PM EST

Michigan’s prevailing wage laws have helped mitigate the effects of this misguided perception. Passage of prevailing wage laws proved that we have had the good sense to make sure that the people who build our schools and office buildings, keep our air conditioners working in the summer and furnaces working in the winter, and come out to unplug our drains at all hours of the day and night will always earn a living wage. This law stands not just to serve as a “minimum wage for tradespeople,” it also protects small contracting businesses. Since everyone is competing at the same baseline pay scale, top tradespeople are not immediately drawn to a company that is able to pay them more than a mom-and-pop contractor. Prevailing wages, then, are simply wages that help all workers in the construction industry earn a fair day’s pay for a fair day’s work.

The bottom line is this: Michigan is a manufacturing state. Our economy cannot exist, let alone continue its upward trend, if we pull the financial rug out from underneath skilled trade workers and leave no benefits to working in the trades. Every legislator I know would say that Career and Technical Education is the key to a successful state-many have worked to ensure that their centers for it are state of the art, as is Macomb County’s. However, if prevailing wage is repealed, this push will have been for nothing-no one is willing to go through that much training and certification to end up making $9.25 an hour. Repealing prevailing wage puts the future of our state at risk.

Democrat Kevin Hertel is a state representative from St. Clair Shores.

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NEW STUDY: Prevailing Wage Laws Close Income Gaps for African Americans in Construction

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FEBRUARY 28, 2018
PUBLISHED BY – Frank Manzo IV

Prevailing wage laws reduce income inequality between African-American and white construction workers by as much as 53% and help more blue-collar workers reach the middle class, according to new research by the Illinois Economic Policy Institute (ILEPI) and University of Illinois at Urbana-Champaign’s Project for Middle Class Renewal.

“While prior research has concluded that there is no relationship between prevailing wage laws and the racial composition of the construction workforce, the data clearly shows that these laws help eliminate income disparities between black and white construction workers,” said study co-author and University of Illinois Professor Robert Bruno. “African Americans employed as laborers, plumbers, pipefitters, electricians, and heavy equipment operators see the largest gains.”

Utilizing publicly-available data from the American Community Survey, the study examined construction worker earnings by race and trade, comparing the results between states with prevailing wage laws and those without. Overall, the researchers found that prevailing wage laws lift the incomes of African American construction workers by an average of 24%, and close the income gap with white workers from 26% to just 12%.

A more advanced analysis controlling for other observable factors found that states which currently do not have a prevailing wage law could reduce income inequality for African-American construction workers by at least 7% if they implemented one.

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Illinois House Testimonies on the Consequences of Repealing Prevailing Wage

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MARCH 1, 2018
PUBLISHED BY – Frank Manzo IV

On Tuesday, February 27, the Labor and Commerce Committee in the Illinois House held a hearing titled “Impacts of Repealing the Prevailing Wage.” Frank Manzo IV, MPP, Policy Director of the Illinois Economic Policy Institute (ILEPI); Robert Bruno, Ph.D., Director of the Project for Middle Class Renewal at the University of Illinois; and Kevin Duncan, Ph.D., Professor of Economics at Colorado State University-Pueblo submitted testimonies.

Good afternoon, Mr. Chairman and Members of the Committee. My name is Frank Manzo IV. I am the Policy Director of the Illinois Economic Policy Institute, a nonprofit research organization that provides candid and dynamic analyses on major subjects affecting the economies of Illinois and the Midwest- specializing in the construction industry.

Economic research finds that repeal of state prevailing wage laws decreases construction worker incomes and reduces apprenticeship training. For example, a peer-reviewed study published within the past week found that blue-collar construction income and benefits fell by between 4 and 11 percent in states that repealed their prevailing wage laws since the 1970s. Another analysis of nine states that repealed their prevailing wage laws since the 1970s found that repeal was associated with a 40 percent decrease in training.

Workers are better trained in states with prevailing wage, so they complete public projects more efficiently. The preponderance of economic research finds that prevailing wage does not affect construction costs. Since 2000, there have been 11 peer-reviewed studies that used regression analysis to examine the effect of prevailing wage on school construction costs. Ten of these studies, or 91 percent, find no statistical impact on the cost of school projects. Repealing prevailing wage does not reduce costs for taxpayers.

…

My name is Robert Bruno and I am a Professor of Labor and Employment Relations in the School of Labor and Employment Relations at the University of Illinois. I also serve as Director of the Labor Education Program and Director of the Project for Middle Class Renewal.

…

The Illinois Prevailing Wage Act levels the playing field for all contractors by ensuring that state and local expenditures maintain and reflect local area standards for wages and benefits.

Prevailing wage is a partial solution to a problem caused by the low-bid model: contractors aiming to lower their bids through cutthroat reductions in wages, benefits, and apprenticeship training. By taking labor costs out of the equation, prevailing wage incentivizes construction contractors to compete on the basis of efficiency and core competencies, rather than on undermining middle-class compensation standards.

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Veterans speak out about prevailing wages in Lansing

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By News 10
Posted: Tue 12:17 PM, Feb 27, 2018
Updated: Tue 7:26 PM, Feb 27, 2018

LANSING, Mich. (WILX) – A group of Veterans gathered in Lansing Tuesday to speak out about and support the prevailing wage vote.

Veterans from three skilled trade unions talked at a press conference at the Michigan Senate building on Tuesday morning.

Their message, “a vote against prevailing wage is a vote against high-quality jobs that allow veterans to support themselves and their families.”

…

“Veterans bring with them the experience, grit and sense of unity necessary to succeed in the skilled trades,” said Brad Reed, a business representative for the Michigan Council of Carpenters and Millwrights (MRCC) and Army veteran. “By protecting the prevailing wage, these high-skill, high-demand jobs are more available and accessible to our nation’s heroes.”

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Employers Steal $15B From Low Wage Workers Each Year

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February 23, 2018

Biography

David Cooper is a Senior Economic Analyst & Deputy Director of EARN. David conducts both national and state-level research, with a focus on the minimum wage, wage theft, employment and unemployment, poverty, and wage and income trends. He also coordinates and provides technical support to the Economic Analysis and Research Network (EARN), a national network of over 60 state-level policy research and advocacy organizations.

… wage theft can occur in a variety of different forms. It can be everything from a worker not being paid for all the hours that they’ve worked, to workers not getting overtime for working more than 40 hours per week, someone getting paid less than the minimum wage, even things like illegal deduction from folks’ paychecks or not getting meal breaks.The really egregious cases are when folks don’t get paid at all and believe or not, that happens more frequently than we certainly would like, particularly in certain industries where there’s a lot of use of, for example, immigrant labor or sub-contractors who may not be paid, not just for all the hours that that they work, but some of them don’t actually even get any of the money that they’re owed.

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GUEST COMMENTARY: WE NEED TO TALK ABOUT WAGE THEFT

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Posted on February 19, 2018
By Melissa Wells

…

Wage theft occurs when a worker performs a job for an agreed-upon wage, and after completing the job, does not receive the full wage they are entitled to. The Center for Popular Democracy estimates that 580,000 Maryland workers suffer from wage theft each year, for a total of $875 million in gross wages lost annually. These numbers may underestimate the scope of wage theft in Maryland, as our Department of Labor, Licensing and Regulation has found that “employees often do not file a claim for a wage payment and collection law violation because they fear retaliation,” leaving us with an incomplete picture of wage theft’s prevalence. Low-wage workers are the most vulnerable to wage theft, particularly in industries like construction, food service and landscaping.

Workers are right to fear retaliation from their employers because Maryland law does not protect them from “discharge, demotion, discipline, or any other action that would reasonably deter an employee from engaging in protected activity under the state’s wage payment and protection law.” This means that though Maryland workers have a right to bring wage theft claims, they do not have a right against repercussions from their employer for bringing the claims.

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Prevailing wage crucial for construction workers

Posted by National Alliance for Fair Contracting on

BY SAMANTHA DRAPER
POSTED 02.20.2018

It is sadly ironic that portions of the construction industry have been fighting for years to reduce wages on these important but dangerous jobs are now claiming they face a skilled labor shortage.

Just last year, California’s housing industry spent millions of dollars lobbying against minimum labor standards in any part of the residential construction sector. Even though research shows that construction labor represents a paltry 15% of total housing construction costs, they tried making the mathematically absurd claim that paying their workers enough to pay the rent -even in exchange for less red tape on certain projects – would somehow make California’s housing affordability crisis worse.

Some California contractors talking about labor shortages were trying to convince California municipalities to become “charter cities” so they could circumvent prevailing wage rules.

But they haven’t been the only ones.

Since 2015, five U.S. states have repealed their prevailing wage laws – laws that establish minimum wages for different skilled crafts on publicly funded projects and promote privately financed training programs that are designed to prevent skilled labor shortages. Other states are considering following suit, even though labor represents just over 20% of the total cost of public works projects – a historically small and declining share in what constitutes fully one-third of all output in America’s fourth-largest economic sector.

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bill-would-allow-cities-counties-to-opt-out-of-prevailing-wage

Prevailing wage a better value

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Henry Yanez
Published 11:00 p.m. ET Feb. 12, 2018

This year, special interests collected signatures to put the question of repealing Michigan’s long-standing prevailing wage law before the Legislature or on the ballot – often misconstruing the true intent of what their petition would do. They tell you it’s about saving you money. Nothing could be further from the truth. Let me tell you what prevailing wage is.

Michigan’s prevailing wage law ensures that our publicly financed buildings, roads, bridges and utilities are constructed using highly skilled and trained workers who are paid the regional average for their trade. The law doesn’t artificially inflate wages or the cost of construction and doesn’t force workers to be union members.

It just ensures that the people building our infrastructure earn a fair wage and benefits, and that their pay reflects their level of training. The law keeps skilled tradespeople and their families here in Michigan, where they spend money, grow the local economy and pay taxes.

Lowering wages reduces job productivity and lengthens the project schedule. Mistakes also happen when inexperienced, lesser-trained workers do the work. Michigan has already experimented with repealing prevailing wage in the mid-1990s. Costs went up and our skilled workforce went down. A study of highway and bridge work in 10 states found that high-wage workers built 74.4 more miles of roadbed and 32.8 more miles of bridges for $557 million less, compared to low-wage workers. Better and more efficient work for less money isn’t a difficult idea to get behind. …

Rep. Henry Yanez, D-Sterling Heights, represents Michigan’s 25th House district.

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