Illinois House Testimonies on the Consequences of Repealing Prevailing Wage

Posted by National Alliance for Fair Contracting on

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the past week found that blue-collar construction income and benefits fell by between 4 and 11 percent in states that repealed their prevailing wage laws since the 1970s. Another analysis of nine states that repealed their prevailing wage laws since the 1970s found that repeal was associated with a 40 percent decrease in training.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.

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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.

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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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Letter to the Editor: Prevailing wage is good policy (IL)

Posted by National Alliance for Fair Contracting on

DECEMBER 15, 2017
By Frank Manzo IV – Guest columnist

One of the many factors that has made Bruce Rauner one of the nation’s least popular Governors has been his proposals to cut pay for middle-class wage earners. So it came as little surprise to see the Illinois Policy Institute (IPI) – a group with close ties to Rauner – recently attacking the Illinois Prevailing Wage Act.

Prevailing wage functions as a local minimum wage on publicly-funded construction jobs like roads, bridges, schools and police stations. It promotes a level playing field for local contractors, ensures these projects are done right and produces good middle-class jobs for skilled local workers.

Like Rauner, the IPI has recently argued for repealing prevailing wage in Illinois. In so doing, the IPI is passing off flawed analysis with little basis in reality as sound policy.

But don’t take my word for it.

Indiana repealed its prevailing wage law in 2015, and “it hasn’t saved a penny,” according to the state’s Assistant Republican Floor Leader in the House, Ed Soliday. And before repealing its law outright, Indiana took other steps to hollow out its construction labor standards. The effect was not only a decline in wages, but hundreds of middle-class jobs fleeing the state. While IPI claims that repeal would save money and boost employment, the fact is that neither happened in the real-life example of Indiana.

But the experience of Indiana and the observations of Rep. Soliday are hardly outliers. Most peer-reviewed economists have arrived at the same conclusions. I have authored or co-authored 25 studies on these laws myself.

Here’s what we’ve found:

First, labor represents a small and historically declining share of construction budgets and prevailing wage has no effect on total project costs.

Reams of data have shown that eliminating local market-based prevailing wage standards only results in high-skilled local workers getting replaced by lower-skilled workers, often from out-of-town. This ultimately yields not just lower wages- but lower levels of productivity, higher spending on fuel and materials, higher risk of safety problems and shoddy workmanship, and more construction workers reliant on taxpayer-funded government assistance programs.

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The Illinois Policy Institute Receives a Failing Grade on Prevailing Wage (IL)

Posted by National Alliance for Fair Contracting on

Published by Frank Manzo, IV
December 7, 2017

A new report released by the Illinois Policy Institute on prevailing wage is factually inaccurate. Here’s why.

The Illinois Policy Institute is a libertarian policy organization with close financial and lobbying ties to Illinois Governor Bruce Rauner. None of their research has ever been subject to peer review. On December 6, 2017, the Illinois Policy Institute released a report calling for the repeal of the Illinois Prevailing Wage Act- a longstanding goal of Governor Rauner. This brief highlights the biggest problems and factual inaccuracies in their report.

Inaccurate Claim #1: “The empirical literature is still divided on the impact of prevailing wage on construction costs.”

Fact: Most peer-reviewed studies (over 75 percent) have concluded that prevailing wage laws have no impact on total public construction costs.

“We got rid of prevailing wage and so far it hasn’t saved a penny.” -Rep. Ed Soliday, Assistant Republican Floor Leader, Indiana House of Representatives, 2017

Inaccurate Claim #2: Prevailing wage laws “favor disproportionately white, unionized workers.”

Fact: By stabilizing the wage floor, prevailing wage reduces income inequality among construction workers of all backgrounds. Prevailing wage standards cover construction workers of all races- union and non-union alike. Peer-reviewed research has found no relationship between prevailing wage laws and the racial composition of the construction labor force. Over the past 10 years, the union membership rate was higher for African-American workers in Illinois’ construction and extraction occupations than for comparable white workers.

“Davis-Bacon has been instrumental in bridging the wage gap for historically disadvantaged sectors of our society. In the face of decaying social and economic opportunities, this measure provides women and minorities with an important tool to achieving greater parity with their mainstream counterparts.”
-Congressional Black Caucus, 1995.

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(One Page PDF of Blog)

(IL) governor candidate Bob Daiber talks prevailing wage, right to work

Posted by National Alliance for Fair Contracting on

Prevailing wage, PLAs supported

By Kelsey Schulz
POSTED ON JANUARY 29, 2018

WOOD RIVER – Bob Daiber expressed his support of prevailing wage and project labor agreements, as well as his opposition to “right to work” laws, during a press conference in Wood River Monday.

Speaking at the Carpenters Union Hall, 277 E. Madison Ave., the Democratic candidate for the governor touched on those topics and more in front of a crowd that included 19 local labor leaders.

“As many of you know I’ve been a strong advocate for organized labor my entire political career,” said Daiber, who is also the Madison County Regional Superintendent of Schools. “I’m here today as a candidate for governor to continue my ongoing pledge to labor that we can move forward in this state collectively with good paying jobs.”

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On prevailing wage: “I support prevailing wages, I always have. There’s no place in the workplace to drive down wages. If we do away with prevailing wages in the state then we are going to be competing with as to who as a worker is going to work for less and that is not a place that we want to go. When we have good jobs in the state that are based on prevailing wage we have workers that are being able to make a living wage and are less dependant upon the state for benefits and that’s the direction I want to move Illinois.”

On project labor agreements: “The project labor agreements are simply agreements between labor and management that help get jobs done on time, on budget with no shutdowns and workers being able to go to work each and every day without any work stoppages.”

On right to work: “Last year, I signed a pledge saying ‘no’ to right to work (for less) in the state of Illinois, because I am an advocate for collective bargaining both in the public and private sectors. As governor, I will sit down with AFSCME at the table and we will work out a contract for all state workers in Illinois because they too deserve to have good paying jobs and benefits.”

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Without prevailing wage laws, guess who loses? Taxpayers. (IL)

Posted by National Alliance for Fair Contracting on

By: JAMES M. SWEENEY
November 28, 2017

James M. Sweeney is president and business manager of the International Union of Operating Engineers Local 150.

Mark Glennon recently argued in a column for Crain’s that municipalities’ budget challenges can only be solved by lowering wages of workers who build our schools, transportation systems and other public infrastructure projects.

Setting aside the irony of a self-described lawyer and venture capitalist calling for middle-class construction workers to take a pay cut, let’s unpack these assertions a little.
Read more: Illinois prevailing wage mandate hurts the economy

Prevailing wage functions as a local market minimum wage on skilled construction work that is paid for by government. It ensures that things like schools, bridges and roads are built by local people who are trained to do the job right the first time, and that local tax dollars do not undercut local wage rates by attracting low-wage, unskilled workers from other parts of the country. Most prevailing wage workers complete three to five years of industry-financed, post-secondary apprenticeship training for occupations that are consistently recognized as among the nation’s most dangerous.

While construction wages and benefits represent just 22 percent of total public works costs, legions of economists have reached the consensus that prevailing wages have no impact on total project costs because they result in higher productivity, fewer safety issues and less spending on materials, fuels and equipment.

If you don’t believe in peer-reviewed facts, consider that Republican Indiana Rep. Ed Soliday said last year that Indiana’s repeal of its prevailing wage law “hasn’t saved a penny.”

What is also known is that states without prevailing wage laws have more income inequality, see more of their tax dollars shipped to firms out of state and spend hundreds of millions of dollars more on programs like Medicaid, food stamps and low-income tax credits for construction workers.

In other words, without prevailing wage laws, taxpayers lose far more than just good local jobs and quality workmanship.

For the record, unions do not set prevailing wage rates. These rates are based on surveys of what union and non-union employees are actually paid in the marketplace. For each craft in each community, the most common wage rate prevails.

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How we investigated wage enforcement at the Illinois Department of Labor (IL)

Posted by National Alliance for Fair Contracting on

By Matt Kiefer | August 9, 2017

“There ought to be a law.”

We throw that phrase around casually in our civic discourse. But sometimes a new law passes that doesn’t make a dent in the problem, as reporter Melissa Sanchez found when she looked into the bleak and arduous process of filing a wage theft claim in Illinois.

Long wait times and high dismissal rates are nothing new at the Illinois Department of Labor, where every year thousands of workers file grievances against employers who have allegedly shorted their pay. A 2012 Reporter investigation, “Waiting in Vain”, revealed the average wage theft claim took about seven months to resolve, with 41 percent ending up dismissed.

Five years on, the Reporter followed up on this story to see how things worked out. It took half a dozen Freedom of Information Act requests and several months of delays, denials and appeals before the department handed over all the wage complaint and other operational records we requested.

Our findings: Wait times for wage theft cases had increased to nine months and dismissal rates jumped to 58 percent. The promised reforms didn’t deliver.

To do our analysis, we loaded the records into a Django database, which is handy for sorting, filtering and looking up related records. When calculating case durations and dismissal rates for wage complaints, we narrowed the record set to wage complaints filed in 2014 due to the volume of pending cases in subsequent years that had unknown resolution dates and outcomes. (Other calculations, such as those counting case volume by year, or the total amount of wages claimed, include all available complaint data.)

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Porter County Commissioners setting conflict of interest rules for bidding (IL)

Posted by National Alliance for Fair Contracting on

By JEFF SCHULTZ
Posted 7/19/2017

The Porter County Board of Commissioners voted in favor of implementing a conflict of interest policy concerning how it hires consultants on Tuesday, and signaled their interest in compiling a responsible bidder policy.

The Commissioners voted 3-0 on first reading for an ordinance to establish the policy that many other states like Indiana have already adopted. Under it, County employees and elected officials would be prohibited from soliciting or accepting gratuities of anything valued at $50 or more from consultants or other parties in contractor agreements, said County Attorney Scott McClure.

McClure said forms of this policy have been put together at the federal level and have trickled down to municipalities. Conflict of interest policies are being required in order to receive matching funds from the federal government that the County would receive for projects through state agencies like the Indiana Department of Transportation, he said.
Commissioner President Jeff Good, R-Center, said that he agrees with the ordinance and not just on the merit that it is being required by the federal government.

“I think it’s just good business,” he said.

“I agree,” said Commissioner Laura Shurr Blaney, D-South.

Next, Marcella Kunstek and Josh Weger of the Indiana, Illinois and Iowa Foundation for Fair Contracting (IIIFFC) came to give the Commissioners a presentation on reasons they recommend the County adopt a Responsive Bidder Ordinance, or RBO.

The organization has been in existence for 20 years but not until recently have RDOs become a growing trend, Weger said. IIIFFC has helped 14 counties in Indiana, 25 in Illinois and seven in Iowa. The mission is to increase market share for contractors, increase hours for workers and drive value for taxpayers.

“We are here to help you in any way improve the value of public works construction to your taxpayers and government,” Weger told the Commissioners.

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Education and Infrastructure Grow the Economy. Other Proposals Being Debated in Illinois Don’t. (IL)

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With the State of Illinois finally having a new budget for the first time in two years, the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign and the Illinois Economic Policy Institute evaluated the economic research on policy measures currently under consideration by state lawmakers.

 

PUBLISHED BY – Frank Manzo IV
JULY 19, 2017

Economic and social science research generally finds that investing in K-12 education and postsecondary education- “human capital development”- and investing in infrastructure- “physical capital development”- are the most effective public policies at improving economic growth. Fiscal sustainability through balanced budgets also allows governments to fund these investments and boosts business confidence.

Investing in public education improves the economy.

  • A well-educated workforce raises median wages in a state.
  • An extra year of education increases a worker’s earnings by 7-10%.
  • A 10% increase in spending on public education leads children to complete more schooling and reduces their chances of living in poverty once they hit adulthood by 3.7% on average.
  • In a survey of economics professors and public policy academics from accredited universities in Illinois, 66% say that expanding enrollment in early childhood education programs would improve the state’s employment rate and grow the economy and a majority say the same about raising the share of the workforce with a bachelor’s degree.

Investing in public infrastructure boosts economic growth.

  • For every dollar increase in infrastructure spending, the economy improves by $1.57 on average.
  • 67% of academic studies find that highway spending has positive impacts on the economy.
    Improving an expanding highways, bridges, and public transportation statistically increases the working-age employment rate by increasing connectivity and improving productivity.
  • In a survey of economics professors and public policy academics from accredited universities in Illinois, 79% think Illinois should increase transportation infrastructure investment.

Other policy changes that have been proposed in Illinois have no, mixed, or limited economic impacts.

1. Peer-reviewed studies demonstrate that “right-to-work” laws have no statistical effect on overall employment in a state economy, but research does find that “right-to-work” tends to reduce wages, limit unionization, and redistribute income from workers to owners.

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Wage theft victims have little chance of recouping pay in Illinois (IL)

Posted by National Alliance for Fair Contracting on

By Melissa Sanchez and Matt Kiefer
Aug. 9, 2017

Most victims of wage theft in Illinois never see a dime because the system meant to help them isn’t working.

That’s not what labor advocates envisioned in 2010, when the state passed a bill meant to give employees a better chance of recouping stolen wages and to toughen penalties against the employers who stiff them.

The situation, however, has gone from bad to worse for the thousands of mostly low-wage workers who have filed roughly $50 million in wage claims with the state since the measure took full effect in 2014.

Workers who report wage theft now face longer wait times, higher dismissal rates and more red tape, according to a Chicago Reporter review of complaint records and enforcement procedures at the Illinois Department of Labor.

Fewer than 1 in 4 workers recouped wages within a year, the analysis found. The odds are so bad, many labor advocates say workers shouldn’t bother filing a claim.

“The worst that can happen to [employers] is that they can use the workers like a credit card, and pay them months after the claims were first filed,” said Jacob Lesniewski, an associate professor of social work at Dominican University, who has studied wage theft.

The Reporter’s review of wage enforcement records found:

  • More claims are dismissed: 58 percent in 2014, up from 41 percent in 2010. The state doesn’t track why cases are dismissed, but most are scrapped early, before workers get a chance to have the merits of the cases weighed.
  • Cases now take an average of nearly nine months to resolve, about two months longer than in 2010. If a case ends up going to a hearing, resolving it could take well over a year.
  • Even when workers win their cases, they might not be paid. Only about 1 in 10 of nearly 500 cases forwarded to the Illinois Attorney General’s Office for collection resulted in payment, and collection can take years.
  • The state has let dozens of deadbeat employers off the hook by allowing them to settle claims early in the enforcement process, avoiding formal violations or financial penalties.

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McHenry County Board approves prevailing wage, ending three years of protest votes

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By KEVIN P. CRAVER
June 26, 2017

WOODSTOCK – The McHenry County Board approved the state prevailing wage rates, ending a three-year streak of casting a symbolic protest vote against them.

Board members voted, 19-3, to adopt the wage schedule, which requires local governments to pay workers hired for public construction projects a specific wage set by the Illinois Department of Labor.

Audience members, many of whom were union members and local residents who came to encourage a vote to approve, applauded when the final vote was tallied.

The County Board since 2014 had voted against prevailing wage, while being careful to instruct county staff to follow the law.

Board member Donna Kurtz, R-Crystal Lake, said voting against prevailing wage sends a negative message to the community, and disputed the notion that the wages are responsible for the county’s sky-high property taxes.

“I think in the end, the overall benefits well outweigh the negatives that some may perceive regarding prevailing wage. It’s the right thing to do – we know it’s the law. It’s the right thing to do,” Kurtz said.

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