According to the conservative Wisconsin Taxpayers Alliance (WTA), state legislators and Gov. Scott Walker may soon act to cut the wages of private construction workers by as much as 44 percent.
How? By repealing Wisconsin’s prevailing wage law — the minimum wage standard on state-funded construction projects such as highways, bridges, and other critical infrastructure.
What they haven’t told you is that their own numbers suggest that this could actually cost taxpayers more than $300 million per year. This is the social cost of wage cuts that would remove thousands of Wisconsin’s working families from the middle class.
The math is really quite simple.
According to the Bureau of Labor Statistics data on which WTA’s analysis relies, the skilled construction workers who would be affected by prevailing wage repeal earn an average of $51,000 per year. The 44 percent savings scenario that WTA and their allies in the Legislature and Walker administration have promised would require that average wage to drop to about $29,000 per year.
When you add up all of the health-care, home-heating, and food subsidies for which these workers and their families would then qualify, as well as low-income tax credits and the lost income tax revenue that the state would have to find from other taxpayers, the total cost of Wisconsin’s wage cut exceeds $300 million annually.
How can any legislator — especially those who campaigned on promises of lifting wages and fiscal responsibility — defend such a position?
The short answer is by ignoring basic math, the fundamental realities of the construction industry and the economy, or both.
Construction is dangerous work. When it comes to the things the public relies on — schools, roads, transit systems and water facilities — having well-trained professionals on the job matters. By establishing criteria that reflect local market standards and incentivize contractors to invest in workforce training, research shows that prevailing wage laws dramatically increase local hiring, productivity, efficiency and safety on the worksite. In doing so, they simultaneously reduce waste, and reduce spending on fuels, materials, equipment and purchased services.
The opposite is also true. States that repeal their prevailing wage laws see lower productivity, less efficiency, more safety problems and on-the-job fatality rates, and more spending on social assistance programs for construction workers — all while exporting more of their construction jobs and tax dollars out of state.
In fact, Wisconsin has already seen this firsthand. Last year, prevailing wage standards were eliminated on locally funded (municipal) construction projects. As a result, out-of-state companies and workers have received 53 percent more in contracts for municipal projects this year.
It doesn’t take a Ph.D. in economics to see how cutting wages and shipping millions of tax dollars out of state can only weaken Wisconsin’s economy. It is basic math.
So too is recognizing the impossibility of meaningful savings on public construction projects by imposing wage cuts on construction workers. Blue-collar construction wages and benefits represent just 20 percent of the total cost of the average public works project. Anyone claiming that repealing prevailing wage will save taxpayer dollars is ignoring how the construction industry and government assistance programs actually work.
Prevailing wage laws have been examined and debated for decades. The overwhelming consensus among researchers, and the nonpartisan Wisconsin Legislative Fiscal Bureau, is that they have no significant impact on total project costs. This is because they trigger dramatic savings through workforce productivity, efficiency and innovations in project management.
As someone who has studied this issue for years, I would urge elected officials in Wisconsin to consider both the reams of publicly available, peer-reviewed research on the impact of these laws, as well as the failure of repeal to deliver as promised in other states. They should talk to the Republican assistant majority Leader of the Indiana House of Representatives, who recently acknowledged that his state “hadn’t saved a penny” after repealing its prevailing wage law in 2015.
But if they don’t, I’d encourage them to dig deeper into the numbers they are quoting and consider the potential social costs. They will find that their proposed construction wage cuts won’t just hurt Wisconsin’s skilled construction industry and its workforce. It will also hurt the economy, shrink the middle class, and impose costly new burdens on every Wisconsin taxpayer.
Frank Manzo IV is policy director of the Midwest Economic Policy Institute in Lagrange, Illinois.
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