Prevailing Wage Studies
Scores of studies have examined the impact of the payment of prevailing wages and benefits throughout the United States. Major studies are summarized below. All of the studies have found that:
- The payment of prevailing wages (living wages) does not increase the cost of construction significantly, if at all.
- In fact, the payment of prevailing wages often reduces costs because of the increase in productivity, the decrease in job site injuries, and savings derived from significant reductions in future maintenance because of the higher quality of the original construction.
- Where prevailing wages are paid, training programs are more prevalent, including higher participation by minorities and disadvantaged workers.
- The failure to pay prevailing wages and benefits creates a direct cost to taxpayers because it shifts the cost of health care and pensions from employers to public health systems.
- The failure to pay prevailing wages creates direct costs to taxpayers and insurers because of the significant increase in job site injuries created by less-well trained workers.
- The failure to pay prevailing wages often increase construction costs, reduces tax revenues, lowers the general economy and forces skilled workers to migrate to other areas, further reducing local tax bases.
1. Gasperow, Bob, Construction Labor Research Council, Federal Highway Administration, Do Higher Wages Raise Labor Costs?, Reported, May, 2001.
Summary: A 14-year study of highway construction in the United States from 1980-1993, found that skills and productivity, not differences in wage rates, are the critical determiner of bottom line labor costs. The federal study found that the payment of prevailing wages and the use of higher paid, higher skilled workers reaped an average of $123,057 per mile in savings. The study found that "There is no basis to the claim that lower wage rates result in lower construction costs."
2. Phillips, Peter, Ph.D., A Comparison of Public School Construction Costs In Three Midwestern States That Have Changed Their Prevailing Wage Laws in the 1990s, February, 2001.
Summary: A study of public school construction costs in Kentucky, Ohio and Michigan over the period 1991-2000, found that the use of prevailing wages raised school construction costs by less than 1%, a statistically insignificant result. Instead of raising costs, the study found that the payment of prevailing wages and benefits forces contractors to hire and train a more skilled and productive labor force. The failure to pay living wages reduces wages, training and health and pension benefits. As a result trained workers migrate to other areas and young less trained workers have an injury rate 15% higher than trained workers.
3. Waddoups, C. Jeffrey, Ph.D., Employer-Sponsored Health Insurance and UncompensatedCare: The Role of the University Medical Center in Clark County, January, 1999.
Summary: A study of the University Medical Center (UMC) in Las Vegas (Clark County, Nevada), found that the failure to pay prevailing wages and health benefits shifts the burden of health care from employers to public health "safety nets." This adds costs to taxpayers as it allows employers to "free-ride" at the public's expense. The additional cost of this shift represents one-third of all uncompensated care at UMC, costing the taxpayers over $10 million per year.
4. Phillips, Peter, Ph.D., Presentation on Prevailing Wage Laws, Michigan Prevailing Wage Symposium, March, 1999.
Summary: A study of school construction costs from 1992-1998 for 104 schools found that with the payment of prevailing wages average costs were $99 per square foot. When prevailing wages were not paid the average cost was $104.
5. Prus, Mark, Ph.D., Prevailing Wage Laws and School Construction Costs: An Analysis of Public School Construction In Maryland and the Mid Atlantic States, January, 1999.
Summary: A study for the Prince George County's County City Council in Maryland compared school construction in three mid-Atlantic states (Delaware, Pennsylvania and West Virginia) with prevailing wages between 1991-1997 with two states (North Carolina and Virginia) that did not pay prevailing wages. The study found that the slight increase in costs for states with prevailing wages was statistically insignificant. Further, future savings in maintenance costs because of higher quality construction produced additional savings for the states.
6. Dillon, Rodger, California Senate Office of Research, Potential Economic Impacts: Proposals of the Department of Industrial Relations to Alter Methodology Relating toPrevailing Wages, May, 1996.
Summary: A proposal to lower prevailing wages has the unintended consequence of producing $800 million in total tax revenues, far overshadowing the expected $160-200 million in savings from the proposal. The proposal would also shift huge numbers of construction workers to public health care systems because of the commensurate loss of health insurance and pension benefits. The proposal would also make public work sites more dangerous because studies have shown that union sites are safer because of the additional safety training received by union workers. Finally, the reduction of prevailing wages would reduce the number of minority workers on public works sites. The proposal was not adopted.
7. Reich, Michael, Ph.D., UC Berkeley Institute of Industrial Relations, Prevailing Wage Lawsand the California Economy, February, 1996.
Summary: A reduction in prevailing ages would have the result of lowering tax revenues, reduce job site productivity, reduce worker training and job site safety, decrease the numbers of minorities in training programs, reduce health care and pension benefits, impact negatively on local and state health care systems, and slow the expansion of the California economy.
8. Phillips, Peter, Ph.D., et al, University of Utah, Losing Ground: Lessons from the Repeal ofNine 'Little Davis-Bacon' Acts, February, 1995.
Summary: A major study of nine states (Alabama, Arizona, Colorado, Florida, Idaho, Kansas, Louisiana, New Hampshire, and Utah) that had repealed prevailing wages found that the repeals had negative impacts on all state budgets. The loss of construction earnings and sales tax revenues had an adverse impact, and cost overruns on road construction also increased costs. In Utah, for example, these cost overruns tripled after the repeal. Training was reduced by 40%, minority representation was reduced in training programs and injuries increased by 15%.
The study concluded that if the federal Davis-Bacon Act was repealed that federal tax revenues would drop by $1 billion per year, and that there would be 76,000 additional workplace injuries in construction annually, with more than 675,000 work days lost each year. These increases would be felt in increased workers compensation costs and costs placed on public health systems by workers without health and pension benefits.
Other Studies: (All of these studies have findings consistent with the studies summarized above).
9. Bilginsoy, Cihan, Department of Economics, University of Utah, Apprenticeship Trainingand Prevailing Wage Laws, February, 1996.
10. Carlson, Richard, Spectrum Economics, Inc., Impact of Repealing California's Prevailing Wage Laws on California's Local Economies, February, 1996.
11. Petersen, Jeffrey, Ph.D., School of Public Health, University of California, Berkeley, Health Care and Pension Benefits for Construction Workers: The Role of Prevailing Wage Laws, April, 1997.
12. Petersen, Jeffrey, Ph.D., School of Public Health, University of California, Berkeley, The Effects for California Construction Workers from Changing the Method of Calculating Prevailing Wage Benefits, February. 1996.
13. Phillips, Peter, Ph.D., Economics Department, University of Utah, Results of a Multi variate Regression Analysis of Construction Workers Incomes with a Focus on the Implementation of Prevailing Wage Policies, February, 1996.
14. Prus, Mark, Department of Economics, SUNY, Cortland, The Effect of State Prevailing Wage Laws, January, 1996.
15. Waitzman, Norman, Ph.D., Department of Economics, University of Utah, Worker Beware: The Relationship Between the Strength of State Prevailing Wage Laws and Injuries in Construction, 1976-1991, 1996.
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