- 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.
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of dollars into construction projects across the nation, the findings show that contractors in states that have repealed prevailing wage laws may face problems staffing up.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Indiana, West Virginia, Kentucky, Arkansas, Wisconsin, and Michigan all repealed their prevailing wage laws between 2015 and 2018.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 In Indiana, West Virginia, and Kentucky — the three states that fully repealed prevailing wage laws — average construction hourly wages were $23.94 before the laws were rolled back.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."
Worker productivity grew at a far slower rate than in states with prevailing wage rates in place, as did hours worked.
There's also a real human cost to repealing the laws. On-the-job fatality rates went up in the states that fully repealed their laws. In states that kept the laws, fatality rates on the job actually went down.
Some of that is due to training, or lack thereof, according to Manzo.
"Better trained workers tend to be much safer," he said. "Prevailing wage attracts and develops skilled construction workers by including apprenticeship training contributions in with labor costs."
One goal behind revoking the laws, as the researchers note, is to curb spending and save money on government-funded construction projects. With excessive spending currently in the crosshairs of the GOP — who are trying to abolish the income tax and IRS — it's a familiar refrain.
"In those states, the pro-repeal governors and state legislatures specifically promised that by cutting the middle class wages and benefits of skilled construction workers, repeal would save taxpayer money on public construction projects and grow their state economies," Manzo told Insider. "But these turned out to be empty promises."
The report finds that repealing wage laws actually led to in-state contractors getting a smaller share of construction work, marking an over $1 billion estimated drop in state revenue for 2017 as governments lost out on taxes that would have been collected from those employers and related businesses.
"That prevailing wage law is also supporting a community that can have a large enough tax base that it can provide the goods and services that it needs to, which attracts businesses, it supports families, it leads to development," Bruno said.
At the same time, a greater share of construction workers in states without prevailing wage laws received food stamps — a similar effect to how raising minimum wages can actually save the country money, since workers won't have to rely on social assistance to cover basic living costs.
Now, with historic investments in infrastructure across the country, those repeal effects might be acutely felt.
"Those states that just haven't invested in that workforce, or incentivized their home state contractors to do this work are going to miss an opportunity," Bruno said. "There's going to be a lack of gain and benefit that would come from that."