New study once again debunks Prevailing Wage law distortions

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Where unions are strong, the Prevailing Wage usually reflects the union wage, benefits and working conditions negotiated in union contracts. According to a study by the Economic Policy Institute, while prevailing wage laws increase hourly wages, they also attract a highly skilled and productive workforce, so overall construction costs typically do not go up.

Missouri legislators should take note of New York study as the same concepts prevail here

By ED FINKELSTEIN

Publisher

The anticipated assault on Missouri’s Prevailing Wage law in the next legislative session by Republican lawmakers and Gov. Eric Greitens took another hit recently with the release of a detailed study of the impact of Prevailing Wage in New York where a similar strangulation effort is being considered for the state’s $14.5 Billion 2018 capital construction budget.

“New York’s Prevailing Wage Law: A Cost-Benefit Analysis,” prepared by research experts at the Economic Policy Institute (EPI), once again exposes the false argument that higher wages result in higher costs to taxpayers, and that by eliminating the Prevailing Wage construction projects will cost less, saving taxpayers’ money.

SIMPLY NOT TRUE

“State prevailing wage laws across the country have increasingly been assailed by those who appeal to lawmakers’” goal of minimizing taxpayer costs — in an attempt to weaken or repeal these policies,” the authors note.

“There’s one problem. According to the most advanced economic research on state prevailing wage laws, the simple narrative largely isn’t true,” the authors found.

Under state Prevailing Wage laws, contractors must pay their workers no less than the “prevailing” wage and benefit levels within the local construction market,” based on voluntary disclosures by contractors.  Where unions are strong, the Prevailing Wage usually reflects the union wage, benefits and working conditions negotiated in union contracts.

ECONOMIC JUSTIFICATION

“While prevailing wage laws do increase hourly wages, they attract a highly skilled and productive workforce,” thus increasing efficiency, the report finds, “so overall construction costs typically do not go up.”

However, the report finds, “…the law also has an economic justification: it protects New York construction workers from being undercut by low-wage, often out-of-state contractors that may covet a large government construction contract and whose presence would take away jobs and erode working conditions for local residents.” (This applies everywhere Prevailing Wage laws are in place.)

“[A]cademic economists from around the country have made prevailing wage laws a research priority over the last 15 years,” the authors note. “In study after study, economists have found no evidence that these laws have had any significant cost effects on the biggest drivers of New York’s capital budget: highways and institutional buildings (e.g., schools).”

PREVAILING WAGE ADVANTAGES

The advantages of a Prevailing Wage law are clear, the study notes. Prevailing Wage laws:

• Strengthen and protect the state’s blue-collar middle class. By ensuring that New York state residents working on public construction projects receive fair pay and benefits, state lawmakers are directly responsible for creating and promoting the types of blue-collar middle-class jobs that have long represented the backbone of communities throughout New York state.

• Bring economic and personal security to New York families and communities, and adds hundreds of millions of dollars to the state’s economy and substantially increases New York’s state and local tax revenues.

• Weed out unfit contractors who are willing to make a profit on the backs of low-wage workers.

• Ensure a safe, productive worksite, noting that workplace injuries are higher where there are no Prevailing Wage laws because unscrupulous contractors are willing to skirt safety laws, putting workers at risk.

OTHER KEY POINTS

The report makes two other key observations:

• Union construction is one of the last fields where a high school graduate not wanting to go to college can find on-the-job training to learn a career that will earn a living wage and ensure health and retirement benefits.

• Reports portraying Prevailing Wage laws as cost generators “Are methodologically defective and offer estimated cost savings that are wildly optimistic.”

ABOUT THE STUDY

The report was authored by Russell Ormiston, associate professor of economics at Allegheny College and research scholar for the Institute for Construction Economic Research; Dale Belman, professor of labor relations and human resources at Michigan State University and president of the Institute for Construction Economic Research; and Matt Hinkel, a Ph.D. student, Labor Relations and Human Resources, Michigan State University.

The full study is available at epi.org/publication/new-yorks-prevailing-wage-law-a-cost-benefit-analysis.

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