Study: Indiana prevailing wage repeal cuts workers’ pay, not construction costs

INDIANAPOLIS—Call it another right-wing anti-union and anti-worker scheme gone wrong. The GOP majority in Indiana’s legislature claimed it would cut school construction costs by repealing the state’s prevailing wage law.


Whoops. It didn’t, but it cut construction workers’ pay instead – just as unions predicted.


A new study, by Frank Manzo of the Midwest Economic Policy Institute and Colorado State University economist Kevin Duncan, showed school construction costs rose slightly in total but per-project costs stayed the same on average since the prevailing wage ban began.


More of the money, however, went into the contractors’ pockets. Repeal of prevailing wage cost the average Indiana construction worker 8.5 percent of his or her pay since the prevailing wage ban took effect in 2015, and the lowest-paid workers lost 15.1 percent.


And the right-wingers’ real aim, union-busting, didn’t work, either. After prevailing wage repeal, unionized construction firms won a higher share of all local construction contracts in 10 Northern Indiana counties than they did before. Their share of school construction was flat.


All that led even he state House Assistant Majority Leader Ed Soliday, R-Valparaiso, to say prevailing wage repeal was a bust. “We got rid of prevailing wage, and so far it hasn’t saved a penny,” he said. And local school boards and governments were upset because they wanted to funnel local taxpayers’ money to local businesses and workers, Soliday added.


The story began when the legislature’s GOP majority catered to right wing businesses and cut-rate anti-worker anti-union contractors, by dumping all prevailing wage laws, effective July 1, 2015.


Then-Gov. Mike Pence – now U.S. vice president under Republican Donald Trump – signed the measure. Pence, also a right winger, was enthusiastic about it. Pence and the other GOPers were confident repeal would trash Indiana’s unionized construction industry.


And repeal’s sponsor, State Rep. Jerry Torr, R-Carmel, used a study by the right-wing Heritage Foundation to justify killing prevailing wage – ignoring prior studies showing the positive impact of the prevailing wage law, and that it did not favor union contractors.


Death of the law had other negative impacts: Indiana construction productivity grew more slowly than workers’ productivity in neighboring states. The education level of Indiana construction workers went down, turnover went up and more of the workers came from out of state, the researchers reported in their study, which the Laborers publicized.


The argument the school districts would save construction money was a wash. While construction costs rose, the union share of school construction projects declined from 83.6 percent to 83.1 percent.



In the 27 months before repeal took effect, school districts in Indiana’s 10 northern counties spent $1.43 million on 146 projects. In succeeding months, through last July, those same counties spent $1.482 million on 189 projects.


“Public bodies in Indiana are required to select” the lowest bidder for construction

projects, and until repeal, wages were out of the equation, at least for projects worth less than $350,000, the report said. Since then, contractors “aim to lower their bids however possible, including reductions in wages, benefits and apprenticeship training.”


But in another indication the right-wing brainstorm boomeranged, the share of all local public construction projects union firms won went up. In the months before prevailing wage died, unionized firms won 75 percent of the bids and provided 87 percent of the workers. After repeal, they won 77.3 percent of bids and provided 91 percent of the workers.


“Repeal of common construction wage (prevailing wage) has had a negative impact on Indiana’s construction industry and workforce, without generating any meaningful savings for taxpayers,” the study said.


The bad impact could last longer, it warned. That’s because ending prevailing wage not only cuts Indiana construction workers’ wages, but reduces local hiring while increasing costs for government aid to workers who, with prevailing wages, would not have needed it.


“The early data from Indiana is unambiguous, and confirms what most peer-reviewed economists have been saying for decades,” Duncan told the Laborers. “Repeal of prevailing wage laws does not save taxpayer dollars, but it shrinks middle-class paychecks, hurts the economy, and causes problems ranging from lower productivity to higher turnover for the construction industry.”

Source: PAI