Myths and Facts about Prevailing Wage

MYTH: Prevailing Wage laws increase the cost of public construction by as much as 20%.

FACT: 75% of recent peer-reviewed studies find that construction costs are not affected by prevailing wages.[1] Weakening or repealing prevailing wages does, however, increase poverty, shrink economic activity and local hiring, and reduce work-site productivity. According to the 2012 Census of Construction, Labor comprises just 17% of total construction costs. Research indicates that when construction wages increase, contractors respond by utilizing more capital equipment, substituting skilled workers for less-productive counterparts, and by reducing material and fuel costs. To save 20% by cutting wages overall would require paying workers well below the federal minimum wage at an illegal rate if at all. Lowering local standards for construction wages tends to attract a lower skilled out-of-area workforce resulting in large productivity losses that eat up any hope for wage savings on the construction project.

  • States with weak or no prevailing wage laws currently spend $367 million MORE per year on food stamps and Earned Income Tax Credits for blue collar construction workers than states with average or strong Prevailing Wage Laws.[1]
  • Prevailing Wage standards discourage unscrupulous contractors who typically cheat on payroll taxes, employ low-skilled workers and shirk health and safety requirements on the job site.
  • Under-qualified workers and unsafe work environments create a far greater risk in terms of sub-par construction, worker injuries and even fatalities. Some states see injury rates rise as much as 20% or more.[2]

 


 

MYTH: Prevailing Wage takes away valuable revenue without providing a significant benefit.

FACT: Paying Prevailing Wage is an investment in a community’s economic development, raising the construction workforce’s skill level and injecting money into the local economy.

  • Prevailing Wages attract skilled, experienced workers who produce superior projects that last longer and incur much lower repair and maintenance costs. States with Prevailing Wage requirements show up to 13-15% more value-added per worker.[3]
  • Construction workers in states with strong/average prevailing wage laws contribute over $5.3 billion more in federal income taxes (on average after credits and deductions) per year than their counterparts in weak/no law states.[1]
  • Workers earning Prevailing Wage are not only significantly less likely to live in poverty and more likely to have health insurance—they have more disposable income to spend on local businesses and services, which stimulates job creation across all sectors of the economy.[1]
  • On average, states without prevailing wage laws export 2% of their total construction investments out of state, leading to job losses and substantial reductions in overall economic output.[1]
  • Communities thrive when middle-class income earners are able to buy homes, raise families and establish strong, stable neighborhoods.

 


 

MYTH: Prevailing Wage excludes a large portion of the workforce including minorities and new craftsmen.

FACT: States that eliminated Prevailing Wages saw decreases in minority participation in construction trades and training programs. Some states have seen training reduced as much as 40%, with even greater decreases among minority apprenticeships.

  • Prevailing Wage policies increase the probability a nonwhite individual will work in construction by 6%.[1]
  • Eliminating Prevailing Wage reduces apprenticeship and construction training opportunities up to 40% and minority apprenticeship training by 54%.[4]
  • The Congressional Black Caucus strongly supports the Davis Bacon Act.
  • Nationally, Military veterans work in construction at substantially higher rates than non-veterans.  In states with prevailing wage laws, veteran construction employment is even higher and poverty amongst veterans employed in the skilled trades decreases by as much as 31%.[5]

 


 

MYTH:  Prevailing Wage policies undermine the ability of government to meet some of its public works needs through volunteerism.

FACT: Major construction crafts, community groups, Republicans, and Democrats all strongly support exempting volunteer labor from Prevailing Wage requirements.

 


 

MYTH: Our community shouldn’t have to pay urban Prevailing Wage rates on rural public works projects.

FACT: Prevailing Wages are determined regionally. “Longstanding practice” by the US Department of Labor is that prevailing “wage determinations are made on a county by county basis.” That’s why, in most cases and for virtually all trades, the Prevailing Wage is significantly lower in rural communities than in urban centers.

 


 

MYTH: Prevailing Wage laws are only supported by labor unions and the far left.

FACT: Prevailing Wage laws were first enacted by Republicans seventy years ago, and have enjoyed broad, bipartisan support ever since. In 2012 and 2015, when proposals were floated at the federal level to eliminate or weaken Prevailing Wage standards, more than 50 Republicans in Congress joined Democrats in support of Prevailing Wage. Some of the most well-known supporters of prevailing wage include President Ronald Reagan, Speaker of the House Paul Ryan, Former Senator Rick Santorum, and Presidents Bill Clinton and Barack Obama.

 


 

Alex Lantsberg, Kevin Duncan, Frank Manzo IV, “The Economic, Fiscal, and Social Impacts of State Prevailing Wage Laws: Choosing Between the High Road and the Low Road in the Construction Industry,” 2016
Peter Phillips, Kansas and Prevailing Wage Legislation.
Peter Phillips, Quality Construction-Strong Communities »
Peter Phillips, Losing Ground: Lessons from the Repeal of Nine ‘Little Davis-Bacon’ Acts.
Frank Manzo, Kevin Duncan, and Robert Bruno, “The Impact of Prevailing Wage Laws on Military Veterans: An Economic and Labor Market Analysis,” 2016

© 2016 Smart Cities Prevail

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