Study: Repealing Prevailing Wage does not save money on construction projects

Indiana’s repeal of Prevailing Wage flopped, as the move did not provide any meaningful cost savings on publicly funded construction projects.

A recently published study by the Midwest Economic Policy Institute found that since Prevailing Wage was repealed, construction wages fell by an average of 8.5 percent.

While taxpayers paid construction workers less, the study showed construction workers who earned 2.1 percent less per hour were 5.3 percent less productive per hour.

This decrease in productivity more than offset paying lower wages, as Indiana public school construction projects realized no significant savings following the repeal of Prevailing Wage.

Dave Wondolowski, Cleveland Building and Construction Trades Council Executive Secretary, said the study proves what building trades members have said all along, that the repeal of prevailing wage does not lower construction costs.

“Wages go down, but project costs remain the same because the contractors increase profit margins and the quality of the work is affected,” said Wondolowski. “Less skilled people will take the lower paying jobs and produce lower quality work, which impacts scheduling timelines.”

Indiana State Rep. Ed Soliday (R-Valparaiso), who voted against the Prevailing Wage repeal, told the NW Times the study confirms the legislation has not saved a penny.

“When you have the common construction wage … you hire local people and they spend their money locally,” Soliday said to the Times. “When you go out-of-state and so forth, and just chase price instead of the overall macroeconomic contribution, you wind up weakening your own community.”

Since Prevailing Wage was repealed in 2015, the lowest paid construction workers in Indiana saw their paychecks decrease by an average of 15.1 percent, while wages for tradesmen and tradeswomen in neighboring states rose 2.8 percent during that timeframe.

Veterans were hurt by the legislation, as there was a 1.2 percent drop in employment of military veterans in the construction industry.

Researchers also found the claim that repealing Prevailing Wage would increase construction project bid competition to be false. Records showed an average of three bids per school project prior to the repeal. After the law went into effect, projects received an average of 2.9 bids per project.

As Ohio lawmakers discuss possible constitutional amendments to repeal Prevailing Wage, Wondolowski believes this study proves the value of the state’s Prevailing Wage law and thinks Ohioans would reject such a move.

“I do believe Ohioans will reject any such effort, seeing it as another effort to bust up our Unions,” said Wondolowski. “These jokers behind this effort in Columbus should try working on some productive legislation that will benefit their districts rather than acting as patsies for the Associated Builders and Contractors and other anti-union groups.”

Click here to learn more about Ohio’s Prevailing Wage law.

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