Economic Research on Prevailing Wage_2015

The Economic Benefits of Prevailing Wages

Frank Manzo IV, M.P.P.

ILLINOIS ECONOMIC POLICY INSTITUTE

Policy Director

Key Points

1. Prevailing wage promotes middle class jobs with good wages

2. Prevailing wage supports high-quality infrastructure that is safe and durable

3. Prevailing wage promotes a skilled workforce that completes jobs right, on-time, the first time

4. Prevailing wage strengthens state and local economies

5. Prevailing wage is the best deal for taxpayers

Frank Manzo IV - [email protected] /// Illinois Economic Policy Institute – www.illinoisepi.org

Prevailing Wage Preserves and

Promotes Middle Class Jobs



18.8% 18.2% 17.0% 16.4%

33.8%

29.9%

26.2%

20.7%

0%

10%

20%

30%

40%

25th percentile 50th percentile 75th percentile 90th percentile

Wage and Salary Income

(Adjusted by Inflation and Regional Prices)

Strong or Average PWL Union Membership

Prevailing Wage Supports the

Largest Privately-Financed System

of Higher Education in America


Apprenticeship Training vs.Typical Bachelors Degree

Source: International Union of Operating Engineers Local 150 Assistant Coordinator-Safety Administrator. Local 150 covers counties in Illinois, Indiana, and Iowa.


• States with PW: Double the Apprentices

Apprentices earn $124,000 more over career. Greater annual earnings gain than bachelor’s degree in: English,

Fine Arts, Education, Physical Fitness and Recreation Activities

Worker training fell by 40% in the nine states that repealed their PW laws from 1979 to 1988.

PW Helps Build Careers, Not Just Jobs


Prevailing Wage Supports High-

Quality Infrastructure That is Safe

and Durable


Net Effects: Increase in Productivity


Debunks the Cost Myth

● Costs =

Business Cycle and Local Conditions +

Materials Costs +

Product Type & Scale

● No statistically significant PWL effect


Governor Rauner Claim

● Rauner: PWLs raise school construction costs by $160M/yr

● Fact-Check: FALSE

Governor assumes no impact of PWL on productivity and does

not factor in school size, type, location, materials, etc.

Real life example: Ohio exempted school construction from its

PWL in 1997… No decrease in construction costs without PWL

regulations, and today schools are no longer exempt.


Prevailing Wage Strengthens State

and Local Economies


High-Road Economic Development

•Consumer spending ↑ = Job creation ↑

•Infrastructure quality ↑ = Job creation ↑-94% of CEOs: Highway accessibility is important location factor

-Every prevailing wage dollar generates $1.50 in economic activity


PW Repeal Economic Effects

90.5%

93.2%

88.1%

91.0%

89.2%

85.0% 87.5% 90.0% 92.5% 95.0%

Indiana (PWL)

Illinois (PWL)

Iowa (No PWL)

States with a Strong PWL

States without a PWL

Value of ConstructionWork by In-State Contractors


Illinois


Illinois

• Lost state and local tax revenues annually:

-$45 million

• Lost federal tax revenues annually:

-$120 million

• Increase in work-related fatalities:

+70 deaths over ten years


Prevailing Wage is the Best Deal for

Taxpayers


PW Reduces Reliance on Public Aid

• Taxpayers do not save by repealing prevailing wage laws, they subsidize.


Earns Less ThanOfficial Poverty Line

Receives FoodStamp Assistance

Repeal Would Strain Public Budgets


Economic or PublicSector Budget Outcome

PercentagePoint Change

WorkersAffected

Total Impact onPublic Budgets

Lives below the poverty line +3.1% +100,00 --

Has health insurance -9.8% -320,000 --

Has a pension plan at work -3.8% -120,000 --

Receives food stamp assistance +3.1% +100,000 +$310 million

Earned Income Tax Credit (EITC) +1.1% +40,000 +$75 million

Federal income taxes paid,after credits and deductions

-- 3,300,000 -$3,400 million

PW is the Best Deal for Taxpayers

● More income to spend

● More sales and income tax

revenues

● Less income inequality

● Less reliance on government

assistance programs

PW raises and compresses wages


Prevailing Wage is the Right Choice

We have a choice: ● Good Jobs vs Bad Jobs

■ PWL = foundation for security, careers

● Stable supply of skilled labor

● Stronger states and local economies


Remember, Remember...1. Prevailing wage preserves and promotes middle class jobs

2. Prevailing wage supports the largest privately-financed system of higher education in America

3. Prevailing wage supports high-quality infrastructure that is safe and durable

4. Prevailing wage strengthens state and local communities

5. Prevailing wage is the best deal for taxpayers


Resources

● Illinois Economic Policy Institute (ILEPI): www.illinoisepi.org and

https://twitter.com/IllinoisEPI.

● Smart Cities Prevail (SCP): www.smartcitiesprevail.org and

https://twitter.com/CaCitiesPrevail.

Comprehensive lists of economic studies on prevailing wage laws:

● http://www.faircontracting.org/studiesandreports

● http://www.smartcitiesprevail.org/resources/research-and-case-studies/


Economic Research on Prevailing Wage_2015

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