Commentary: Results in states that repealed their prevailing-wage laws aren’t pretty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In the case of states that repealed laws governing who can win bids on public infrastructure projects, the data overwhelmingly suggests that such a correction is warranted.

Between 2015 and 2018, six U.S. states—Indiana, Wisconsin, Michigan, Kentucky, West Virginia and Arkansas—each repealed their state prevailing-wage laws that established minimum labor standards on taxpayer-funded projects like roads, bridges, schools and water infrastructure.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)

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

Posted by National Alliance for Fair Contracting on

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)