The Building Tradesman Newspaper

Friday, April 27, 2001

Another study weighs in to bolster prevailing wage

By The Building Tradesman

Over the last three years, academic scholars have picked apart and analyzed prevailing wage laws in 14 states - and the same conclusions keep popping up time and time again.

Those conclusions: repeal of state prevailing wage laws has brought no significant savings to taxpayers. And, while taxpayers have not saved any money, prevailing wage repeal has been murder on construction workers' income levels. In states where prevailing wage laws have been repealed, significantly lower pay rates went into place, at a time when the construction industry is struggling to retain a sufficient work force with wages that have barely kept up with inflation.

The latest study, dated Feb. 1, 2001, comes from a familiar academic source, Professor Peter Phillips of the University of Utah. Phillips updated his paper on the affect of changing prevailing wage laws in three states, analyzing what happened in Michigan, Kentucky and Ohio.

The Michigan Building and Construction Trades Council offered the information from the study to the Michigan legislature, which, as we reported in our last issue, has four pieces of anti-prevailing wage legislation before it - two of which would repeal the use of prevailing wage on school and road construction projects.

Phillips' original study on the effects of prevailing wage repeal in Michigan, Kansas and New Mexico was successfully used in March 1999 to convince a majority of Michigan legislators at the time not to go along with repeal efforts.

Many people forget that in 1994, federal Judge Robert Cleland overturned Michigan's Prevailing Wage Act - ruling that it was pre-empted by the federal ERISA law - and it stayed unenforced until an appeals court overruled Cleland and reinstated the law in July 1997.

Phillips studied school construction costs in Michigan during that two-and-a-half year period, and found "there was no statistical difference in costs" to the state when the prevailing wage laws weren't in effect.

Before that was a study released in 1998 by State University at New York Professor Mark Prus, who examined how the law, or lack of a law in six East Coast states, affected school construction costs

"I compared costs for schools built under prevailing wage laws to those not covered, and controlled for differences in building materials, school size, school type and cost of living," Prus said. "I concluded that prevailing wage laws had no impact and that cost variances were caused by other factors, such as size and cost of materials."

After repeal in Kansas, contributions by construction contractors to pensions and health insurance fell by 17 percent. And, last year a study by Harvard and Stanford universities revealed that in nine states that repealed their prevailing wage law from 1979-1988, wages for trade union workers "fell sharply."

Researchers found that union construction members earned 20 percent more than their nonunion counterparts before prevailing wage repeal. But five years after repeal, the union income advantage dropped to about 10 percent over nonunion workers.