Dewey Pearman
Sept. 2, 2018
Interesting data is now becoming available to test the pro and con arguments made in 2015 in the debate on legislation in the Indiana General Assembly to repeal Indiana Common Construction Wage law. That law was repealed in reaction to arguments that repeal would accomplish two objectives. First, repeal would increase competition in bidding among building contractors seeking to do work for public agencies. And, the cost of construction projects paid for by taxpayers would decrease. Opponents of repealing the law asserted that not only would these results fail to be realized but that repeal would result in, among other outcomes lower wages for workers.
Indiana’s common construction wage law, like similar laws in other states and at the federal level are intended to insure that when government spends money in a given labor market it does not inadvertently impact wages normally, or commonly paid in that market for similar type of work. That is, if as an example a carpenter in a given area is typically paid $25.00 an hour in wages and received $10.00 an hour in fringe benefits workers on public projects should not be paid more or less than those amounts for the same work. Doing so would interfere in the private labor market by providing an upward or downward pressure on local wages. The law required all contractors bidding on a public project to pay the wages and benefits customarily paid in that area. The law provided for an objective process by which wage and benefit rates were determined and also provided for public input into the determination.
On the issue of lower costs to taxpayers a 2018 study released by the Midwest Economic Policy Institute, The Effects of Repealing Common Construction Wage In Indiana, Impacts on Ten Construction Market Outcomes, finds that the average cost of school construction projects did not decrease after repeal but actually increased. The study focused on school projects because they tend to be more homogeneous than other types of public construction projects. The study, written by Kevin Duncan, Ph.D. Colorado State University-Pueblo and Frank Manzo IV, MPP, Midwest Economic Policy Institute looked at 146 school projects awarded before and 189 projects awarded after repeal of the law. The average project cost before repeal was $1.42 million and $1.48 million after the repeal. Contrary to arguments for taxpayer savings the average cost of school projects went up $60,000 after repeal. These findings are consistent with similar studies in many other states.
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In the end, what Indiana got with the repeal of the common construction wage law is an increase in taxpayer costs and lower wages for blue collar construction workers. While, the Indiana Department of Labor is required to submit a report on the effects of repeal of the common construction wage before July 2021 the early evidence suggest it is already time for the Indiana General Assembly to put this law back on the book.