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Repeal prevailing wage law would weaken Illinois' economy

6 months, 3 weeks ago from Illinois Ag Connection

State budget deficits and debt from underfunded pensions have prompted calls for the repeal

Mounting state budget deficits as well as debt from underfunded pensions have prompted calls for the repeal of Illinois' prevailing wage provisions for publicly financed construction projects in order to save taxpayer money.

But the state of Illinois' prevailing wage law is associated with positive labor market outcomes, and its costs are less than the substantial positive benefits it has for the state economy, says new research co-written by a University of Illinois labor expert.

According to Robert Bruno, a professor of labor and employment relations on the Urbana campus, prevailing wages for public construction projects in Illinois provide numerous positive economic and social outcomes for construction workers and the state.

"A policy like the prevailing wage law is one of those safeguards that protects Illinois' economy and workplace," said Bruno, also the director of the Labor Education Program in Chicago. "Any efforts to change, alter or weaken it would put one of the most important pillars of a middle-class economy in the state at risk. There are enormous implications when you attempt to undermine a standard for compensation and health and safety, especially in an occupation as dangerous as construction work."

Bruno and co-authors Alison Dickson Quesada, a labor education specialist; Frank Manzo IV, a former research associate and current policy director of the Illinois Economic Policy Institute; and Dale Belman, of Michigan State University, argue that repealing Illinois' prevailing wage law would not result in any significant savings for taxpayers or the state.

Critics of the law claim it inflates the costs of government contracts by compensating labor at levels higher than market wages.

"Prevailing wage laws are among the oldest policies intended to regulate labor markets," Bruno said. "They serve to establish minimum or community standards in labor markets."

Repeal of the law would result in job losses throughout the state's economy as well as increases in construction worker fatalities and declines in construction worker benefits and training opportunities, Bruno said.

According to the research, the indirect effects of the law's repeal would result in about 3,300 net jobs lost; a contraction of more than $1 billion in state gross domestic product annually; and more than $44 million in lost state and local taxes as well as roughly $116 million in lost federal tax revenue.

"This is one of the key policies that allows the state of Illinois to sustain a high-wage economy," Bruno said.

Prevailing wage laws mandate that contractors and subcontractors pay all workers employed on taxpayer-financed projects no less than the general prevailing rate of wages (including benefits) where the work is performed.

The study forecasts that employment in the construction industry would likely increase if the statewide law were to be repealed. But any new jobs linked to the law's repeal would be significantly offset by job losses experienced throughout the rest of the state, and would likely cost the state money and reduce construction sector efficiency, Bruno said.

"We took a very conservative approach in running our impact model, and we still found that the overall net impact of repealing the law would be a decrease in the total number of jobs in the state, all due to the reduction in wages," Quesada said.

If prevailing wage laws were to be repealed in Illinois, the researchers estimate that an additional seven Illinois construction workers would die each year from work-related injuries.

According to the paper, states with prevailing wage laws maintained an average fatal work-related injury rate of 10.82 deaths per 100,000 full-time construction workers from 2008-2010. States with no prevailing wage requirements experienced an average fatal injury rate of 12.12 deaths per 100,000 workers during the same time frame.

Although not statistically significant because of the small sample size, the numbers suggest that states with prevailing wage laws suffer fewer work-related casualties in the construction sector than states with no regulations, the researchers said.

"Extrapolated over the span of a decade, that's about 70 additional Illinois workers who would suffer fatal work-related injuries in the construction industry," Bruno said.

Additionally, the data examined in the study strongly affirm the claim that state prevailing wage laws support construction apprenticeship programs, a critical component for an industry continually concerned about the availability of sufficiently skilled workers, the researchers say.

The study also finds no substantial evidence that state prevailing wage laws are harmful to African-American participation in the construction industry.

"The argument that states with prevailing wage laws have reduced African-American participation in the construction industry are based on simplistic analyses which are, at best, descriptive and unconvincing," Bruno said. "Our paper finds no evidence that such laws act to the detriment of African-American workers."


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