Repeal of prevailing wage law would result in a weakened economy, University researchers say
January 27, 2014
Pressure from increasing state budget deficits, as well as debt from underfunded pensions, have caused critics to call for the repeal of Illinois’ prevailing wage law for government construction projects.
However, according to new research co-authored by a University labor expert, Illinois’ prevailing wage law creates many positive economic and social impacts, and repealing it would not result in any considerable savings for taxpayers or the state.
“We have a strong prevailing wage law in Illinois,” said Robert Bruno, professor of labor and employment relations. “It’s better than most states in that it assures public projects are done efficiently and on time with the best results possible.”
The policy mandates that contractors and subcontractors are required to pay all laborers who perform work on public projects to match the prevailing wage, the weighted average wage of a county, and benefits.
The study is co-authored by Bruno; Alison Quesada, a labor education specialist; Frank Manzo IV, policy director of the Illinois Economic Policy Institute; and Dale Belman, professor of labor and industrial relations at Michigan State University, and it serves as the first study of the social and economic impacts of the statewide prevailing wage law.
Bruno said critics of the law claim that the prevailing wage is inflammatory, and it makes funding public projects more expensive by compensating labor at rates higher than market wages.
However, repeal of the law would weaken the overall economy, Quesada said, because while it would lead to more jobs in construction, it would result in job losses throughout the state, a decrease in the GDP and millions of dollars in lost tax revenue.
“We found that any jobs linked to a repeal of the law would be significantly offset by job losses experienced throughout the rest of the economy due to the reduction in wages,” Quesada said.
The indirect effects of appealing the prevailing wage law would result in about 3,300 net jobs lost, in a total GDP contraction of more than $1 billion annually for Illinois, more than $44 million in lost state and local taxes and roughly $116 million in lost federal tax revenue, according to the study.
“The prevailing wage law that we have now is one of the safeguards that protects our state economy and allows it to maintain a high-wage economy,” Bruno said.
The research also finds that repeal of the law would result in negative social impacts that include increases in construction worker fatalities and declines in construction worker benefits and less opportunities for apprenticeship training in the construction industry.
“What we found is that the prevailing wage law that we have literally saves lives,” Bruno said. “Our research estimates that an additional seven construction workers would lose their lives on an annual basis and extrapolated over the span of a decade, approximately 70 additional workers would suffer from fatal work-related injuries.”
To compare, states with a prevailing wage law maintained an average fatal work-related injury rate of 10.82 deaths per 100,000 full-time construction workers from 2008 to 2010; during the same time frame, states without a prevailing wage law had an average fatal work-related injury rate of 12.12 deaths per 100,000 workers, according to the study.
“This shows us that states with a prevailing wage law are better off because they tend to suffer fewer work-related injuries than states without any regulations,” Bruno said.
Another negative effect of repealing the law would result in a decline of training opportunities in the construction industry.
“The prevailing wage law right now ensures that we’re hiring skilled workers and that we’re not bringing in cheap labor,” Bruno said. “It’s a good use of taxpayer dollars because it supports construction apprenticeship programs, which creates an availability of sufficiently skilled workers.”
At the University, mail carriers work under a prevailing wage law under a collective bargaining agreement struck up by the Service Employees International Union, Local 73, and the University, said SEIU spokesman Ricky Baldwin.
“The mail carriers at the University prefer the prevailing wage rate,” Baldwin said. “They prefer … negotiating with free standing wage rate. It’s a security that they’ve had for many years, and it’s the kind of civility that the wage rate isn’t just whatever we work out, and it’s based on something outside of the University. Collectively, they like that, and it’s a good thing.”
Julianne can be reached at [email protected]