Research regarding Prevailing Wage has consistently shown that prevailing wage laws are good for working families while not raising the cost of government-funded construction projects. For over a decade, research by the Economic Policy Institute (EPI) has shown that not only are prevailing wage laws good for workers, but that repealing laws already in place are bad for workers.
The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI believes every working person deserves a good job with fair pay, affordable health care, and retirement security. To achieve this goal, EPI conducts research and analysis on the economic status of working America. EPI proposes public policies that protect and improve the economic conditions of low- and middle-income workers and assesses policies with respect to how they affect those workers.
For more than 40 years, big business and the Republican party have teamed up to drive down the wages of construction workers by attacking their unions, passing so-called “right-to-work laws”, and weakening or repealing prevailing wage laws— which protect construction wages from downward pressure. They have, unfortunately, been very successful.
Research by EPI has shown:
- Labor costs are not the dominant costs in government construction contracts. Even including benefits and payroll taxes, labor costs are roughly 20-30% of construction contracts, according to the Census of Construction (Phillips 1998).4 Thus, for example, if labor costs are 25% of total costs and prevailing wage rules raise wages by 10%, the impact on contract costs would be no more than 2.5%. Thus, even if there is an increase in contract costs, it is likely to be small—to the point of being undetectable in some instances and/or by some studies.
- Higher wages might be offset by a rise in productivity. Prevailing wages can attract better-skilled, more productive workers, or firms may rely on higher managerial productivity or invest in labor-saving technologies to offset higher labor costs (Philips 1996).
- Higher wage costs might also be offset through “factor substitution,” i.e., substituting more expensive labor with, say, cheaper materials.
- Contractors not subject to prevailing wage laws might retain the money they save in wages as higher profits rather than passing the savings on to the government. Alternatively, contractors paying prevailing wages might absorb the higher wage costs, paying for them out of their profits rather than passing them on.
In addition to the research showing prevailing wage laws to be good for workers with no added costs to government entities, EPI has also studied the effects on ending existing prevailing wage laws and found that:
“For more than 40 years, big business and the Republican party have teamed up to drive down the wages of construction workers by attacking their unions, passing so-called “right-to-work laws”, and weakening or repealing prevailing wage laws— which protect construction wages from downward pressure. They have, unfortunately, been very successful. Construction wages are lower today than they were in 1970, despite 40 years of economic growth and a higher national income.”