National study examines impacts of Prevailing Wage laws

Prevailing wage laws require a minimum wage rate to be paid to construction craft workers on publicly-funded construction projects.  They are intended to prevent the erosion of local labor market standards and promote a level playing field for contractors by ensuring that public works expenditures maintain and support local area standards.

Researchers from the Illinois Economic Policy Institute, Colorado State University-Pueblo and Smart Cities Prevail have released a first-of-its-kind report assessing the economic, social and fiscal impacts of prevailing wage laws.  The report, titled The Economic, Fiscal, and Social Impacts of State Prevailing Wage Laws: Choosing Between the High Road and the Low Road in the Construction Industry, conducts a comprehensive review of the impact of prevailing wage laws throughout the country and concludes that prevailing wages do not increase construction costs.  It also concludes that repealing or weakening prevailing wage laws increases poverty, shrinks economic activity and reduces worksite productivity.  The report concludes that the majority of earlier studies finding that prevailing wage laws increase costs have not been peer-reviewed and consist of flawed logic assuming, for instance, that low skilled workers have the same productive output as high skilled workers. 

Prevailing wage laws also have ancillary benefits such as reducing income inequality, promoting racial parity in construction and benefiting military veterans.  They increase the percentage of workers with employer-funded health and pension benefits, which in turn reduces reliance on local public assistance programs.  

The report provides evidence that repealing prevailing wage laws is not fiscally or socially prudent as it places a strain on public funds and ultimately costs taxpayers money.  This is because prevailing wages establish middle class income and benefit standards, promote individual financial security, reduce reliance on public assistance and increase tax revenues, all of which bolster the local economy.  In general, prevailing wages promote a strong construction industry which, in turn, fosters a strong middle class and supports working families.  There is, on the whole, a net gain to the economy from such policies.
For questions regarding the prevailing wage in your home state, consult your public works counsel.

By Jolene Kramer | February 26, 2016

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