Commentary: Results in states that repealed their prevailing-wage laws aren’t pretty

Posted by National Alliance for Fair Contracting on

Crain’s Chicago Business
January 30, 2023 | Frank Manzo

A good rule of thumb in policymaking is “first, do no harm.” When elected leaders fall short, the genius of our system is that we have the opportunity to course correct, either at the ballot box or by demanding legislative change.

In the case of states that repealed laws governing who can win bids on public infrastructure projects, the data overwhelmingly suggests that such a correction is warranted.

Between 2015 and 2018, six U.S. states—Indiana, Wisconsin, Michigan, Kentucky, West Virginia and Arkansas—each repealed their state prevailing-wage laws that established minimum labor standards on taxpayer-funded projects like roads, bridges, schools and water infrastructure. All did so promising to save money, including by “building five schools for the price of three.”

The problem is: it never happened. As one Indiana Republican lawmaker put it, “we got rid of prevailing wage and, so far, it hasn’t saved us a penny.” His conclusions were ultimately confirmed by the Indiana Department of Labor.

In Wisconsin, a study that examined highway projects pre- and post-repeal showed that the state not only failed to save money, but that it might have increased cost overruns. In West Virginia, the School Building Authority similarly concluded that prevailing-wage repeal was not saving taxpayers any money. The list goes on.

…

That’s why researchers at the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois Urbana-Champaign recently compared construction labor market outcomes in repeal states against the states that maintained their prevailing-wage laws.

The results are not pretty.

Compared to states that maintained their prevailing-wage laws, construction wage growth lagged by 4% to 13% in repeal states. Construction employment growth and workforce productivity were slower as well. On-the-job fatalities increased by 14%. Repeal created unnecessary hardships for blue-collar workers struggling to keep up with rising costs.

Repeal also imposed new burdens on taxpayers. Local businesses won fewer projects, with more than $1 billion in taxpayer dollars being exported to out-of-state contractors annually. And, instead of delivering any project savings, repeal states saw the number of construction workers relying on food stamps and other government assistance programs grow as job quality eroded.

The bottom line is that market standards and job quality matter. Especially in construction, where competence can be a matter of life and death and a lack of job quality only makes it harder to attract skilled workers to in-demand and physically challenging occupations.

(Read More)

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Rolling back laws that set minimum wages for construction workers meant pay shrunk, jobs got more dangerous, and workers had to rely more on public assistance

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BUSINESS INSIDER | Juliana Kaplan – Jan 16, 2023

  • A new study looks at the impact of rolling back prevailing wage laws on wages and workers.
  • Prevailing wage laws set pay standards for government contract workers, particularly construction workers.
  • Rolling back the laws led to lower wage growth, and increased worker fatalities.

It turns out that getting rid of some minimum wage controls left workers earning less, being less productive, relying more on public assistance, and even facing a higher risk of dying on the job.

That’s according to a new study from the Illinois Economic Policy Institute (ILEPI) and Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana-Champaign. Researchers Frank Manzo, Robert Bruno, and Larissa Petrucci examine the impact of repealing prevailing wage laws — laws that essentially set minimum wages for construction workers on government contracts.

With the bipartisan infrastructure bill pouring billions of dollars into construction projects across the nation, the findings show that contractors in states that have repealed prevailing wage laws may face problems staffing up. Historically, prevailing wage laws have helped plug labor shortages, and contractors could have trouble competing with higher-paying competitors across the country.

Indiana, West Virginia, Kentucky, Arkansas, Wisconsin, and Michigan all repealed their prevailing wage laws between 2015 and 2018. Using data from the US Census Bureau and Department of Labor, the researchers looked at how construction workers fared as those laws were rolled back.

Those states saw their wages for construction workers drop. In Indiana, West Virginia, and Kentucky — the three states that fully repealed prevailing wage laws — average construction hourly wages were $23.94 before the laws were rolled back. By 2017, the average hourly wage was $23.77. Meanwhile, states with the laws in place saw wages grow by 12.2% in the same period.

“What prevailing wage does, it kind of standardizes and stabilizes the industry of a local market,” Petrucci said. “When you repeal that, what you have is contractors who are able to undercut wages and pay workers far below the training that they have developed to get these kinds of jobs. Naturally, you’re gonna see wages decrease.”

(Read More)

Report: Union contractors have less trouble finding skilled workers

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Researchers from the Illinois Economic Policy Institute (ILEPI) and the Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana-Champaign (UIUC) have analyzed three years’ worth of data collected by the Associated General Contractors of America (AGC) and have concluded that the shortage of skilled workers has been harder on nonunion construction firms.

The numbers

Nonunion construction firms when compared to union contractors, according to the ILEPI and PMCR report, were:

16% more likely to report difficulty filling open positions;
13% more likely to report losing skilled workers to other industries;
21% more likely to report project delays due to workforce supply or retention issues; and
27% more likely to report a poor local workforce training pipeline.
The AGC surveys that researchers used were conducted from 2018 to 2021, so the additional workforce difficulties encountered by nonunion construction companies were present before the COVID-19 pandemic. The AGC data included responses from 1,768 union contractors and 3,893 nonunion contractors.

“While a tight labor market is clearly impacting the entire construction sector, the data shows that these issues are far more acute in the nonunion segment of the industry,” said Frank Manzo IV, ILEPI executive director and report coauthor.

“The superior outcomes reported by union firms reveal that long-term investments in job quality and apprenticeship training are every bit as critical to the success of construction employers as the ability to access materials, secure regulatory approvals or win project bids,” he said.

On issues surrounding the materials supply chain and regulatory approvals, the gap between nonunion and union responses was negligible, according to researchers.

(Read More)

If you want a construction project finished on time without worker shortages, hire a unionized crew, a new report says

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Juliana Kaplan
May 10, 2022

  • Unionized construction jobs tend to offer better pay, benefits, and training opportunities.
  • A new report found nonunion firms have more trouble hiring, and are more likely to see project delays.
  • While construction is more unionized than the national average, the majority is still nonunion.

Like businesses across the country, construction contractors say they’re dealing with a labor shortage.

Despite rising wages, the Associated Builders and Contractors said the industry still needs nearly 650,000 workers after3.2% of the workforce quit in March 2022, the second-highest rate since the Bureau of Labor Statistics began measuring it. Amidst a hot real estate market, employers struggle to hire enough workers to keep up.

“The construction worker shortage has reached crisis level,” Home Builder Institute president and CEO said in November 2021.

But the authors of a new report from the Illinois Economic Policy Institute (ILEPI) and Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana Champaign argue that the labor supply crunch is nothing new. There is, however, one factor that seems to make the difference in whether contractors can keep their workers and finish projects on time: If their workers are unionized.

“Union contractors are significantly less likely to have delays in completion times due to shortages of workers — and they’ve actually been more likely to add workers in this tight labor market,” Frank Manzo IV, the executive director of ILEPI and co-author of the report, told Insider.

Manzo, PMCR director Robert Bruno, and PMCR fellow Larissa Petrucci analyzed the results of the Associated General Contractors of America (AGC) surveys from 2018 to 2021. The annual survey polls about 2,000 firms on what’s happening in the world of construction labor; beginning in 2018, the survey broke out specific data from union and nonunion contractors.

The results: Nonunion contractors were 16% more likely to say they had difficulty filling open roles than union contractors. They were also 21% more likely to see their project completion delayed because of worker shortages, and 13% more likely to lose craft workers to other industries.

“Union contractors have been significantly less likely to be losing their workers to other industries. So the non-union side is losing their workers to other industries at much higher rates than the union side,” Manzo said. “That’s because the union segment of the industry offers competitive annual earnings, health insurance coverage, retirement benefits, all of which rival bachelor’s degrees.”

(Read More)

(See PDF Copy of Report)

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STUDY: Prevailing Wage Laws Boost Homeownership for Construction Workers

Posted by National Alliance for Fair Contracting on

February 19, 2020
By: Frank Manzo IV, Jill Gagstad, Robert Bruno, Ph.D.

Prevailing Wage and the American Dream: Impacts on Homeownership, Housing Wealth, and Property Tax Revenues

This study examines links between prevailing wage laws and homeownership, housing wealth, and property tax revenues for … workers and their communities. …

State prevailing wage laws promote the hiring, development, and retention of skilled workers by encouraging investment in apprenticeship programs. Prevailing wage rates often include a cents-perhour-worked contribution into workforce training institutions. As a result, apprenticeship training is 6 to 8 percent higher in states with prevailing wage laws, boosting worksite productivity by an average of at least 11 percent (Bilginsoy, 2003; Duncan & Lantsberg, 2015). Since state prevailing wage laws enhance productivity and labor costs are a small percentage of total costs in construction, the preponderance of the peer-reviewed research has concluded that state prevailing wage laws have no impact on total project costs (Duncan & Ormiston, 2017).

…despite a robust economic literature on apprenticeship training, safety, worker earnings, and costs, little research has been conducted showing the effect of state prevailing wage laws on construction worker homeownership.

This report, conducted jointly by the Illinois Economic Policy Institute (ILEPI) and Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana-Champaign, fills that void in the economic research, assessing the impact of state prevailing wage laws on the homeownership rate of skilled construction workers. The impact of state prevailing wage laws on the home values of blue-collar construction workers is also analyzed, determining whether the policy allows construction workers to build household wealth and positively contribute to their communities through property tax revenues.

(PDF Copy of Full Report)

(Visit the ILEPI Website)

Study: Construction apprenticeships lead to higher average pay than college degrees in Illinois (IL)

Posted by National Alliance for Fair Contracting on

AUTHOR: Kim Slowey
PUBLISHED: Jan. 16, 2020

Dive Brief:

  • The Illinois Economic Policy Institute, in conjunction with the University of Illinois at Urbana-Champaign’s Project for Middle Class Renewal, released the results of a study that found that those enrolled in joint labor-management registered apprenticeships experience comparable training hours, graduation rates and pay as those who attend a four-year university in Illinois. …
  • Despite the potential for periods of unemployment due to the cyclical nature of the construction industry and accounting for the gaps between when a job is over and the next one starts, a union journey worker ($2.4 million) can expect to make about as much as someone with a bachelor’s degree ($2.5 million after student debt) during the life of their career. While the total earnings figure factors in student loans, those who “earn while they learn” through apprenticeships don’t have the burden of student debt.

Dive Insight: …

  • Joint construction programs have had a 54% completion rate since 2000, comparable to a public, four-year university’s rate of 61%.
  • The racial makeup of graduates from joint construction programs is similar to that of public universities in Illinois.
    Sometimes, apprenticeships in specific trades in Illinois can result in even higher wages. After completing a five-year apprenticeship through the International Brotherhood of Electrical Workers-NECA (National Electrical Contractors Association) Institute a journeyman wireman in Illinois makes more than $49 per hour.

(Read More)

STUDY: UNIONIZATION FELL LAST YEAR, BUT ILLINOIS’ MIDDLE CLASS STILL DEPENDS ON UNIONS

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For Immediate Release: September 2 2019
Contact: Frank Manzo IV, 708-375-1002, fmanzo@illinoisepi.org

Chicago: On Labor Day 2019, researchers from the Illinois Economic Policy Institute, University of Illinois at Urbana-Champaign, and University of California, Irvine released the sixth annual State of the Unions report for Illinois. The study finds that unions play an important role in Illinois’ economy communities, despite declining union membership over the past decade.

Read the entire report, The State of the Unions 2019: A Profile of Unionization in Chicago, in Illinois, and in the United States, here.

Since 2009, Illinois’ union membership rate has declined by 2 percentage points. After a one-year uptick, Illinois’ unionization declined from 15.0% in 2017 to 13.8% in 2018. Unionization decreased in the Chicago metropolitan area by about 12,000 members over the year.

 

“Labor unions have recently faced many legislative and judicial setbacks including the Supreme Court decision in Janus v. AFSCME, which may have affected unionization rates,” said Professor Robert Bruno, who serves as Director of the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign.

However, public sector workers continue to have high rates of union density. About half of all public sector workers are unionized in both Illinois (46.4%) and the Chicago metropolitan area (46.2%) as of 2018, exceeding the national public sector unionization rate (33.9%). In comparison, fewer than one-in-ten private sector workers (8.7%) are now union members in Illinois.

Despite declines in union membership, the report concludes that labor unions boost worker incomes by lifting hourly wages by an average of 11%. In addition, the authors find that African Americans, military veterans, and rural workers are disproportionately more likely to be union members in Illinois.

“Unions raise wages for everyone, but especially for low-income and middle-class workers,” said Frank Manzo IV, Policy Director of the Illinois Economic Policy Institute. “Unions reduce inequality, provide family-supporting careers for our nation’s heroes, and foster a strong middle class in communities across Illinois.”

(Visit ILEPI’s Website)

(See PDF of Study)

Fair Contracting Foundation of Minnesota and ILEPI Address Minnesota’s AG (MN)

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Minnesota’s Attorney General Keith Ellison invited Fair Contracting Foundation’s Mike Wilde and ILEPI’s Frank Manzo to present on the value of prevailing wages to nearly 400 public attorneys and regulators. The history and policy purpose behind prevailing wage laws was covered by FCF. The Illinois Economic Policy Institute’s Manzo gave the audience the findings of a recent study that examined 640 school bid packages. The academic study gave further empirical evidence to the audience of compliance professionals that the projects that required prevailing wages were no more costly than those projects that did not. Attorney General Ellison has already proven to be a champion of Minnesota’s workforce and FCF is encouraged by his commitment to prevailing wage laws.

 

                           

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Higher Minimum Wage Could Mean A $6,000 Raise For As Many As 1.4 Million Illinois Workers

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Frank Manzo IV
October 25, 2018

La Grange: An increase to Illinois’ state minimum wage would grow the state’s economy and boost the paychecks of as many as 1.4 million workers by up to $6,000, according to new research from the Illinois Economic Policy Institute (ILEPI) and Project for Middle Class Renewal at the University of Illinois Urbana-Champaign.

The policy brief assesses the economic impacts of three different proposals (increasing to $10 an hour by 2019, to $13 an hour by 2022, and to $15 an hour by 2024) to raise the state’s current minimum wage, which has been set at $8.25 an hour since 2010.

“Increasing the minimum wage is a win-win-win for workers, taxpayers, and the economy,” said ILEPI Policy Director Frank Manzo IV. “It means higher wages and less poverty for workers, more spending across the economy, higher tax revenues, and less reliance on welfare programs.”

Among the three scenarios studied, researchers found that a minimum wage increase would increase paychecks for 6%-23% of the state’s total workforce.

…

The report finds that the increased consumer spending associated with wage increases would grow the economy by $5 billion-$19 billion per year.

The researchers note that wage increases have not produced the negative impacts on employment often claimed by opponents. A recent study found that job growth in the City of Chicago, which began increasing its minimum wage in 2014, has more than kept pace with surrounding suburbs that made no changes to their minimum wage policies. Additionally, researchers note that 9 of the 13 states with minimum wages of at least $10 per hour have unemployment rates that are the same or lower than Illinois.

(Read More)

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.

(Read More)

(Read Executive Summary)