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Prevailing Wage Letters

Prevailing Wage Studies


  • Quality Construction — The Effect of Prevailing Wage Regulation on the Construction Industry in Iowa, by Peter Philips, University of Utah. 2006 (56 pages)

    This recently released report by Dr. Peter Phillips of the University of Utah looks at how the state prevailing wage regulation has impacted the Iowa construction industry, especially the training and benefit structure. Phillips’ usual detailed research in Iowa indicates that prevailing wage laws help construction prepare for the future as it builds in the present, by encouraging collective bargaining which in turn encourages apprenticeship training.

    For example, in Iowa, on average, jointly run, union-management apprenticeship programs account for almost 70 percent of all construction apprentices trained in the state. The author dedicates an entire chapter to why prevailing wage regulations increase training, productivity and wages. Phillips also suggests that training leads to higher quality construction and lower downstream maintenance costs. Importantly, Professor Philips found that in Iowa as elsewhere, prevailing wage regulations increase construction apprenticeship training by both union and nonunion contractors.

  • The Adverse Economic Impact from Repeal of the Prevailing Wage Law in Missouri, by Michael P. Kelsay, Ph.D., L. Randall Wray, Ph.D., and Kelly D. Pinkham, M.S.. (152 pages)

    Attempts to repeal the prevailing wage law in Missouri are based upon the claim that repeal will save dollars on total construction costs and will bolster state and local budgets.

    An independent research study conducted by the University of Missouri at Kansas City indicates that repeal of the prevailing wage statute in Missouri would not save dollars on construction costs and would result in a negative economic impact on the states families and taxpayers as well as the state and regional economies.

    The study estimates the total economic loss due to repeal of the prevailing wage law in 2004 would be a loss of income and revenue between $317.8 million and $384.2 million annually.

    In 2001, Missouri had the lowest number of injuries per worker of all reporting states in the region as well as the strongest commitment to job training and apprenticeship programs. In addition, the state reported the lowest number of severe injuries (e.g. workdays lost) of all reporting states in the region. Repeal of the states prevailing wage laws under consideration by the state legislature would probably endanger Missouris superior safety record.

    In addition, the study indicates negative impact in these areas:

    • Lower wages for all construction workers in Missouri (direct impact of repeal in Missouri) and reduced incomes for other workers in industries located in Missouri (the indirect, or induced, impact of repeal).
    • Reduced health and pension benefits for construction workers in Missouri (and, as a result, probability of eventual increased costs to state and local communities).
    • Reduced sales tax revenues to the State of Missouri and regional economies in Missouri.
    • Reduced corporate income taxes for the State of Missouri.
    • Weakened system of construction apprenticeship training in Missouri.
    • Increased occupational injuries and their associated costs in Missouri.
    • Increased construction work done by out-of-state contractors in Missouri.
    • Lower productivity of the construction workforce.

    For more information or a copy of the study contact Stan Kolbe, director of legislation, at skolbe@smacna.org or (202) 547-8202.



  • Health Care Subsidies in Construction: Does the Public Sector Subsidize Low Wage Contractors?, by C. Jeffrey Waddoups. (20 pages)


  • Making Hay When It Rains: The Effect Prevailing Wage Regulations, Scale Economies, Seasonal, Cyclical And Local Business Patterns Have On School Construction Costs, by Hamid Azari-Rad, Peter Philips, and Mark Prus, Journal of Education Finance 27 (Spring 2002), pp. 997-1012. (15 pages)

    In this very innovative paper in the Journal of Education Finance the authors examine and present estimates of the relative payoffs of alternative methods of reducing school construction costs - timing purchases, deregulating wages and building larger school facilities. While it is frequently speculated that a hot construction market is an expensive time to build large numbers of new schools, the study examines the economics as well as 10 years of actual data and statistics behind construction markets and school construction costs. The key findings of the study are: building without prevailing wages does not save on construction costs but that school districts building counter cyclically can enjoy a buyer's advantage during economic downturns. In addition, spacing out school construction projects so that many projects are not begun in the same period also promises significant savings to school districts.


  • A Comparison of Public School Construction Costs In Three Midwestern States that Have Changed Their Prevailing Wage Laws in the 1990s, by Peter Philips, University of Utah. 2/01 (16 pages)

    The report focuses upon the states of Ohio, Kentucky and Michigan to examine whether or not the application of prevailing wage regulations raises construction costs, and if so, by how much. Specifically, the report analyzes new public school construction in the aforementioned states over the period of 1991-2000 to assess statistically whether or not changes in the prevailing wage policies as they applied to public school construction raised or lowered the cost of building public schools. The analysis of the school construction completed in the three states during the periods when prevailing wage laws were in effect, suspended or repealed found no statistically significant difference between those schools built with or without prevailing wage regulations. In fact, on a number of instances school construction costs actually rose, such as in Ohio, subsequent t repeal of the states prevailing wage law.


  • Health Care and Pension Benefits for Construction Workers: The Role of Prevailing Wage Laws, by Jeffery S. Petersen, Industrial Relations, Vol. 39 (April 2000) pp. 246- 264 (19 pages)

    This article examines the affect of state prevailing wage laws (PWLs) on the amount and mix of wages and benefits paid to construction workers over a decade. When comparing the experiences of different states, PWLs enhance both wages and benefits, with the largest percentage increase going toward employer pension contributions. PWLs appear to create an incentive for both employers to pay and workers to accept a larger percentage of their total compensation in the form of benefits. Federal corporate reporting on covered benefit programs documented that benefit payments to union construction workers are substantially higher than those to nonunion workers. For example, in 1992, health, welfare and pension plans in the construction industry paid $13.2 billion in benefits to active construction workers and retirees. The benefits per worker for union construction amounted to $12,798 whereas the benefits per worker for nonunion construction amounted to $434. Thus, while unionized construction workers accounted for 20 percent of the construction workforce, unionized benefit programs accounted for 88 percent of all benefit payments in the industry.


  • The Effect of State Prevailing Wage Laws on Total Construction Costs, Mark J. Prus, State University of New York, Cortland, N.Y. 1/96 (15 pages)

    The first study is the first to look at the actual construction costs of prevailing wage projects on a variety of construction projects since the flawed 1983 study of unrelated regional areas, "The Effect of the Davis-Bacon Act on Construction Costs in Rural Areas," (Fraundorf, 1983). The Prus study analyzes the impact of prevailing wage legislation on total construction costs using data on nonresidential construction in the United States from the F.W. Dodge Company, an organization that collects and disseminates data on construction projects to the construction industry. These data give information on construction costs at the start of the project, or bid price. The study also contains information on detailed structure type, project location, project scale and technical characteristics of the project such as the number of stories and type of frame. The report also favorably compares the cost and related factors between public, private and federal projects on a regional basis.

  • Losing Ground: Lessons from the Repeal of Nine "Little Davis-Bacon" Acts, Garth Mangum, Peter Philips, Norm Waitzman and Anne Yeagle, University of Utah. 2/95 (98 pages)

    The study examines the impact of repealing state prevailing wage laws on 9 states that repealed their statutes between 1979 to 1988. The report compares the 9 repeal states with the remaining 32 states with prevailing wage laws and the 9 states that never enacted prevailing wage laws. From this detailed comparative analysis the authors found several clear and profound by negative effects of repeal. While most closely examining the impact of repeal in the state of Utah the author emphasizes the worsening level of worker wages, benefits and training as well as increased worker injuries and greater number of project change orders and cost overruns in all states reviewed.

  • Square Foot Construction Costs for Newly Constructed State and Local Schools, Offices and Warehouses in Nine Southwestern States, by Peter Philips, University of Utah. 9/96 (48 pages)

    Prepared for the State of New Mexico Legislature, the study compares actual public square foot construction costs in the five Southwestern and Intermountain states that have state prevailing wage laws with the four states in the same region that do not have state prevailing wage laws. These five have law states are New Mexico, Texas, Oklahoma, Wyoming and Nevada. The four no-law states are Arizona, Utah, Idaho and Colorado. During the period of the study, 1992-94, elementary and middle schools cost less per square foot in the five-state group with prevailing wage laws. The conservative conclusion from the actual construction cost data is that cost differences found between states does not provide support for the proposition that the elimination of prevailing wage law saves on public construction.

  • Kansas and Prevailing Wage Legislation, by Peter Philips, University of Utah. 2/98 (56 pages)

    The report is a case-study comparison of new school construction costs in Kansas compared to the surrounding Great Plains states that have retained their prevailing wage laws. The conclusion finds no difference in square foot construction costs between comparable states with and without prevailing wage laws. Training and productivity levels did drop however after the Kansas prevailing wage repeal. Especially noted were drops in wages, minority apprenticeship-training and employer contributions to pension, health and welfare programs. In addition to these negative results Kansas reaped a costly, higher injury rate in construction.

  • Kentuckys Prevailing Wage Law: Its History, Purpose and Effect, by Peter Philips, University of Utah. 11/99 (91 pages)

    The comprehensive report on Kentuckys prevailing wage law analyzes actual construction cost data, historical information, training, health and safety statistics to rebut the myths surrounding prevailing wages. Beyond its focus on Kentucky, the author includes a lengthy chapter on the history and economic impact of prevailing wage laws on minorities in the national construction industry. Thereport also examines the positive impact the Kentucky prevailing wage law has had an improving worker benefits, training and job safety. The study concludes that not only are prevailing wage jobs not more expensive, but they achieve solid benefits in the form of lower injuries, greater minority employment, a larger pool of skilled workers, and increased health and welfare benefits.

  • Prevailing Wage Regulations and School Constructions Costs: Evidence From British Columbia, by Cihan Bilginsoy and Peter Philips, University of Utah. Journal of Education Finance, Winter 2000. (22 pages)

    The report examines the proposition that eliminating prevailing wages reduces school construction costs by analyzing the unique final construction cost data from the United States and British Columbia, CA. Specifically focusing on the prevailing wage law in British Columbia (BC) where public construction wages must reflect 90 percent of the collectively bargained wage rate for each construction occupation, the report utilized final cost data from new elementary and secondary public school construction projects from six school districts in BC tendered between 1989 and 1995. The conclusion of the study rebuts the proposition that BCs prevailing wage law was the sole or main factor in school construction costs in the period examined.

  • Prevailing Wage Laws and School Construction Costs, Mark J. Prus, Ph.D., Economics Department, State University of New York. 1/99 (34 pages)

    This comprehensive study was commissioned at the request of the Council of Prince George's County, Maryland to analyze the impact of prevailing wages on actual costs for public school construction projects in Maryland and the Mid-Atlantic States. The county is embarking on a major six year capital program for the construction and renovation of public schools and wanted four areas reviewed:

    1. A comparison of school construction costs in states with prevailing wage laws to those in states without prevailing wage laws in the mid Atlantic region.

    2. A comparison of school construction costs within Maryland for those local jurisdictions that pay prevailing wages to costs in those areas where prevailing wage rates are not required.

    3. An analysis of the extent to which local contractors have been harmed by unfair competition from outside contractors due to the absence of prevailing wage requirements on school construction projects.

    4. An examination of the extent to which the absence of prevailing wage rates in school construction impacts construction wages across the construction industry.

    Based upon a statistical analysis of actual construction cost data on individual school construction projects provided by the F. W. Dodge Corporation found conclusive evidence of the positive impact of prevailing wage laws on construction quality, labor markets, worker wages and construction costs.


 
 


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