In this chapter, we examine prevailing wage legislation in the United States, beginning with the statutes that apply at the federal level. We then turn to state statutes that legislate prevailing wages at the state and local government level, before turning specifically to Missouri’s legislation. Finally, we briefly summarize arguments for and against prevailing wage legislation, including a brief summary of the findings of previous empirical studies. We will conclude that the existing studies are generally inadequate in a number of important ways.
Chapter III provides our own contribution to the empirical literature, attempting to rectify the weaknesses of previous studies. This chapter examines the argument that prevailing wage regulations raise public construction costs. Using data from the F.W. Dodge Company over the period 1993-2002 for the 12-state region of Nebraska, South Dakota, North Dakota, Kansas, Missouri, Iowa, Minnesota, Wisconsin, Illinois, Indiana, Michigan, and Ohio, we examine whether the existence of a state prevailing wage law results in higher construction costs on state projects.
In Chapter IV, we quantify the economic impact of the prevailing wage statute on the State of Missouri. In previous work, assessment of economic impacts has been inadequate because the short run and long run economic impact of the prevailing wage has not been clearly understood. A misconception of the prevailing wage statute is that it subsidizes the union sector at the expense of the non-union sector, state residents, and state revenues. In reality, repeal of prevailing wage statutes can be quite costly over the longer run. The economic impact of potential earnings losses to the state can be considerable, and include tax revenue losses to both state and local governments.
Using RIMS II multipliers obtained from the Bureau of Economic Analysis for the State of Missouri and four sub-state county agglomerations (2 urban and 2 rural), we analyze the direct and induced impact from a hypothetical repeal of the prevailing law in Missouri. These spillover effects are quantified in terms of lost earnings. We conclude that the prevailing wage statute has a positive and substantial impact on construction workers, their families, other industry and their families, and state and county tax revenues.
Chapter V analyzes the impact of prevailing wage statutes on (1) the level of employee benefits, (2) skills training and apprenticeship – their benefits and costs, (3) on-the-job safety, injuries and fatalities, (4) productivity issues, and (5), the potential impact of repeal on Missouri-based construction contractors. Chapter VI offers conclusions and recommendations for further study.
CONTENTS
Chapter I. Executive Summary
Chapter II. Introduction to the Study
- Background on Prevailing Wage Law and the Davis-Bacon Act
History of Prevailing Wage Laws in U.S. States
Prevailing Wage Legislation - State of Missouri
Review of Previous Studies
Chapter III. The Impact of Prevailing Wage Laws on Total Construction Costs: North Central States Region
- Summary of Data, Models Used and Detailed Empirical Findings from Regression Analysis
The Impact of PW Laws on Total Construction Costs North Central States Region
Descriptive Findings
The Multiple Regression Model
Public Projects Vs Private Projects in Non Prevailing Wage States
Estimation of PW Effects
Chapter IV. The Economic Impact of the Prevailing Wage Statute on the State of Missouri
- Input -Output Analysis
Construction Industry in the United States and Missouri
Expected Loss of Earnings in Construction Due to Repeal of Prevailing Wage Laws
State and Regional Impact of Repeal of Missouri Statute
General Overview of Construction in Missouri
Cost and Benefits to the State of Missouri Resulting from Repeal of Prevailing Wage Legislation
Multiplier Effects
Multiplier Effects for the State of Missouri
Analysis of Impacts of Repeal on Missouri Regions
Chapter V. Impact of Prevailing Wage Laws: Upon Benefits, Training, Safety, Productivity and In-State Contractors
- Health Care and Pension Benefits
Skills Training and Apprenticeship
On the Job Safety - Injuries and Fatalities
Productivity in the Construction Sector
Analysis of Firm Location - PWL and Non-PWL States
Chapter VI. Summary and Conclusions
References
Appendices
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