Study: Prevailing Wage Adds 17.5K Jobs to California Economy

 

14

Apr. 2015

Study Authors to Explain Groundbreaking Research Findings
on April 16 Conference Call

Sacramento – Prevailing Wage policies add 17,500 jobs and $1.4 billion in output across California’s economy, according to a new study released today by Smart Cities Prevail – a leading construction industry education and research organization.

To Download the Full Report: Click Here.

Titled, Building the Golden State – The Economic Impacts of California’s Prevailing Wage Policy, the first-of-its-kind report was co-authored by Colorado State University-Pueblo Economist Dr. Kevin Duncan and Smart Cities Prevail Researcher Alex Lantsberg. The study was conducted using IMPLAN software (the industry standard for analyzing the effects of government policy choices on the economy) to model the impact of eliminating California’s prevailing wage standards.

In addition to measuring the policies’ impact on job creation and overall economic output, the study also concludes that prevailing wage policies facilitate broad improvements to the construction industry as a whole–including substantial reductions in materials waste and dramatic increases in both local hiring and overall workforce productivity.

Dr. Duncan and Mr. Lantsberg will convene a conference call to review their findings for members of the media on Thursday, April 16 at 1:00 p.m. PDT. For conference call details, call Dale Howard at 916-402-3762.

“While past research has already concluded that prevailing wage promotes workforce development, safer job sites, less dependence on public assistance, and has only neglibile impacts on project cost, these new findings show the value of these standards both to the construction industry and our economy as a whole,” said Dr. Kevin Duncan. “From creating jobs to increasing efficiency, it is clear that prevailing wage policies provide taxpayers with a far better return on investment than the less beneficial alternative.”

While California has recently enacted new legislation (SB 7) to encourage more of its cities to enact prevailing wage standards, several other states – including Nevada, Wisconsin, Indiana, and Michigan – are either considering or have recently passed laws to weaken prevailing wage requirements on public works.
“This study provides important context for the recent changes to California’s prevailing wage laws, but also for the debates that are happening in other states across the country,” Lantsberg said. “The data shows that the decision to weaken or eliminate prevailing wage is a choice that can increase poverty, export more tax dollars out of state, and eliminate thousands of jobs in the process.”

Lantsberg added, “It’s important to note that this study focuses on the benefits of the state prevailing wage policy, but does not analyze the additional positive benefits that come from federal and local policies. For example, the state and federally funded high speed rail project in California is estimated to create 20,000 prevailing wage construction jobs in the first five years of construction, and tens of thousands more in the years that follow.”

Summary of Findings:

“Building the Golden State – The Economic Impacts of California’s Prevailing Wage Policy”

Consequences of Prevailing Wage Elimination in California:

  • Gross job losses of 48,500 and net job losses of 17,500
  • 3% – 5.5% increase in out-of-state contracting
  • State economic output reduced by $1.4 billion
  • Real income reduced by $1.5 billion
  • More construction professionals living at or near the poverty line
  • 12% decline in workforce productivity and 5% increase in materials waste

Kevin Duncan, Ph.D. is a nationally recognized economist specializing in labor and regional economics. Dr. Duncan currently works as a Professor of Economics in the Hasan School of Business at Colorado State University – Pueblo and Senior Economist at BCD Economics, LLC. He teaches regional economics where his students learn economic impact analysis.

Alex Lantsberg is a researcher with Smart Cities Prevail specializing in economics, land use, and urban planning. Mr. Lantsberg holds a Master’s Degree in City Planning from the University of California, Berkeley and an undergraduate degree in finance from Northern Illinois University.

BACKGROUND:

Prevailing wage is the standard rate paid on publicly funded projects to a worker in a given trade, in a given region. Prevailing wage laws were first established federally and in some states in the 1930s – and supported by leaders from both political parties – in order to raise the quality of government-funded construction projects and encourage more local hiring.

Some other recent studies on prevailing wage policies, and their key findings, are listed below.

  • Rates of serious injury in the construction industry increased by 21% after Kansas repealed its prevailing wage laws. The study also found a 38% decrease in apprenticeship training, with minority participation in those programs decreasing 54%. For more information, click here.
  • A study of prevailing wage in Santa Clara County compared one library built with prevailing wage and one built without, and found that local contractors were used 71.2% of the time on the prevailing wage project, but only 11.8% of the time on the non-prevailing wage project. The study also found that non-prevailing wage workers could qualify for thousands of dollars a year in taxpayer funded public assistance. To read more, click here.
  • A 2011 study of road construction in Colorado compared state funded non-prevailing wage road projects to federally funded prevailing wage road projects and determined that there is no cost increased associated with prevailing wage. To read more, click here.
  • A 2015 study of school construction costs found that West Virginia, a state has prevailing wage laws, had lower per square foot construction costs than the non-prevailing wage states on its borders. To read the full study, click here.

Smart Cities Prevail is a non-profit 501(c)(4) organization and California’s leading research and informational resource on prevailing wage. For more information, visit www.smartcitiesprevail.org.

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