Study finds Indiana prevailing wage repeal reduced worker pay, didn’t save money on public works projects

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WISCONSIN CONTRACTORS lose work after prevailing wage repeal.

Missouri lawmakers should take heed

Indianapolis — As Republicans in the Missouri Legislature try yet again to repeal Missouri’s prevailing wage laws, a new study of the three-year impact of Indiana’s prevailing wage repeal shows the state didn’t save anything on construction costs. Instead, workers’ wages declined and productivity went down.

When then Gov. Mike Pence signed the 2015 repeal of Indiana’s prevailing wage statute, the Republican proclaimed that eliminating county minimum pay rates for public works projects would save the state and local governments money without reducing the paychecks of workers.

“Wages on public projects should be set by the marketplace and not by government bureaucracy,” Pence said at the time.

“By repealing the common construction wage, our state is putting hardworking taxpayers first, lessening the burden on cash-strapped local governments and schools, and opening doors of opportunity for small businesses across our state.”

Three years later, the first in-depth, non-partisan analysis of the impact of Indiana’s prevailing wage repeal proves Pence was wrong.

Missouri lawmakers, pushing no fewer than 16 bills to repeal or curtail Missouri’s prevailing wage laws, would do well to pay attention to what happened in Indiana.

WORKER PAY, PRODUCTIVITY DECLINED 

The Midwest Economic Policy Institute, in a report for the The Times of Northwest Indiana, determined that following prevailing wage repeal, workers in the Indiana construction industry are earning less than they were before, with no meaningful cost savings for Indiana taxpayers.

The institute used U.S. Department of Labor statistics for the four quarters preceding repeal of Indiana’s prevailing wage and the four quarters after to determine how the policy enacted by the Republican-controlled General Assembly affected 10 market outcomes.

The study found that construction wages fell in Indiana by an average of 8.5 percent following repeal of the common construction wage, with the lowest-paid workers seeing their paychecks drop by 15 percent.

Over the same period, construction wages in Illinois, Michigan and Ohio — which retained their prevailing wage laws — grew a combined 2.8 percent, according to the report.

The researchers, Frank Manzo IV, of the policy institute, and Kevin Duncan, of Colorado State University-Pueblo, explain that Indiana’s prevailing wage acted like a minimum wage for skilled construction workers, reducing income inequality by stabilizing the wage floor.

FORCED TO USE UNSKILLED WORKERS, PRODUCTIVITY DECLINED

When it was removed not only did wages drop in Indiana, but the state’s construction industry had to turn to individuals with fewer skills to fill positions that previously employed workers with training and credentials beyond a high school education.

The changes in the construction industry workforce negatively impacted worker productivity, which grew at a slower rate in Indiana compared to Illinois, Michigan and Ohio.

The study found worker productivity in Indiana increased only 4.4 percent between 2014 (before the 2015 repeal) and 2016. It grew 9.8 percent over the same period in the neighboring states.

According to Manzo and Duncan, that means while public projects in Indiana appear to cost 2.1 percent less per hour, contractors and taxpayers are paying workers who are 5.3 percentage-points less productive per hour.

As a result, the relative decrease in worker productivity more than offsets any benefits from Indiana’s lower wages, they said.

NO SAVINGS ON PUBLIC WORKS

The researchers also analyzed public construction bid data in 14 northern Indiana counties, including Lake, Porter, LaPorte, Newton and Jasper, to determine how prevailing wage repeal affected competition, union jobs and school construction.

Prior to repeal, the study found, public works projects received, on average, three bids.

Proponents of prevailing wage repeal claimed it would increase competition. Post-repeal, governments saw little change, still receiving an average of 2.9 bids per project, according to the study.

Repeal supporters claimed prevailing wage favored union contractors.

But in fact, union businesses grew their market share post-repeal to 91 percent of market value, up from 87 percent.

Finally, the analysis found no significant change in the value of Indiana public school construction costs following repeal.

“The early data from Indiana is unambiguous and confirms what most peer-reviewed economists have been saying for decades,” Duncan said.

“Repeal of prevailing wage laws does not save taxpayer dollars, but it shrinks middle-class paychecks, hurts the economy and causes problems ranging from lower productivity to higher turnover for the construction industry.”


REPUBLICAN LAWMAKER: ‘HASN’T SAVED US A PENNY’

Indiana State Rep. Ed Soliday (R-Valparaiso) who joined the entire Northwest Indiana legislative delegation in voting against prevailing wage repeal in 2015, said the study confirms what he thought all along: “It hasn’t saved us a penny.”

“When you have the common construction wage... you hire local people and they spend their money locally,” Soliday said.

“When you go out-of-state and so forth, and just chase price instead of the overall macro-economic contribution, you wind up weakening your own community.”

(Information from The Times of Northwest Indiana.)

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Prevailing wage loss in Wisconsin killing local contractors’ business

Out-of-state workers benefit; Wisconsin workers lose out

Madison, WI – Not only would killing Missouri’s prevailing wage law drop wages, as noted in the Page 1 story on the devastating impact of Indiana’s prevailing wage repeal, killing the law would reduce jobs for Missouri’s construction companies, and in turn, kill jobs for Missouri workers, a recent report from Wisconsin reveals.

According to a report from the Wisconsin Contractor Coalition (WCC) tracking the influx of out-of-state construction contractors flooding into Wisconsin in the first four months of 2017, there was a 53 percent increase in the amount of work awarded to out-of-state firms, a loss of $32 million to Wisconsin contractors.

Wisconsin’s prevailing wage law repeal went into effect January 2017.

While Wisconsin Gov. Scott Walker argued that prevailing wage laws increase the cost of construction –– the same argument being made in Missouri –– many studies, including a recent one from the Midwest Economic Policy Institute, refute that statement.

The study found no clear connection between construction costs and wages, meaning higher wages did not equate to higher overall construction costs.

“This is yet another study confirming that paying family-supporting wages for public construction projects does not drive up costs for taxpayers,” said WCC Board Member Bill Kennedy, president of Rock Road Companies.

MATERIALS, NOT WAGES, DRIVE UP COSTS

Prevailing wages are not what is driving construction costs higher, it’s basically construction materials, notes the report. Key construction materials like steel, concrete and liquid asphalt have increased more than 200 percent and “sometimes as high as 300 percent“ in the past decade and are the primary driver for escalating project costs.

Using road construction as a prime example, the report noted, wages comprised only about 25 percent of construction costs.

The WCC pointed out many advantages of having a prevailing wage. Among them:

Funding worker development and skills training to create cost-saving efficiencies.

Workers are better trained in the latest technologies that save time and, ultimately, save money for taxpayers.

• Well-trained, higher-skilled workers produce more value than poorly trained, low-wage workers. Because private-sector workers receive the latest training on the most advanced machinery, the projects they work on have shorter build times and greater durability over time.

The Wisconsin Contractor Coalition is an informal coalition of 468 construction businesses that collectively work to protect the construction industry. It is the state’s leading bipartisan advocate of legislative, regulatory and public policies affecting the construction industry.

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