A new Economic Commentary by the Midwest Economic Policy Institute details how the repeal of prevailing wage in Wisconsin will negatively affect Waukesha County.
In July 2015, Governor Walker signed the 2015-17 State Budget into law, making significant changes to the state’s prevailing wage laws. Prevailing wage is the minimum hourly wage employers must pay construction workers on projects funded by state dollars. Act 55 of the bill repeals the state prevailing wage law for local governmental units and municipalities. Local municipalities – such as villages, towns, cities, school districts, and sewerage districts – are not obligated to pay a minimum hourly wage to construction workers. These changes will take effect on January 1, 2017. After the change, state agency and state highway public work projects are the only projects in Wisconsin where prevailing wage rates will apply.
This change will have significant impacts on Wisconsin and Waukesha County’s workforce and economy. Analysis from the report finds:
- In 2017, the State of Wisconsin is expected to lose 8,700 jobs across all sectors, $1.2 billion in overall economic output, and $77 million in tax revenues from weakening prevailing wage;
- Waukesha County will lose 600 jobs and $82.4 million in economic activity with the weakening of prevailing wage;
- In Wisconsin, public works construction workers are more productive than the average construction worker due to a history of prevailing wage standards promoting apprenticeship training in the sector; and
- Median housing costs are 47.1 percent of the typical income for a laborer earning the prevailing wage in Waukesha County – a construction worker will exhaust more than 47.1 percent of his or her income on housing from weakening prevailing wage.
Arguments that prevailing wage increases construction costs by 30 percent are mathematically impossible. Labor costs account for just 22.5 percent of total costs on heavy and civil engineering projects in Wisconsin, making it impossible to save as much as 30 percent by eliminating prevailing wage. An overwhelming majority of research (Prus; Wial; Azari-Rad et al.; Duncan & Lantsberg) on prevailing wages has concluded that a state prevailing wage law has no statistical impact on the overall cost of public construction projects.
Prevailing wage supports middle-class careers in the construction industry. By paying a living wage, prevailing wage encourages skilled workers to enter the construction industry, increases worker training and productivity, and reduces workplace injuries and illnesses. These effects lead to workers who complete jobs on-budget and on-time, offsetting any increases in labor costs. Repealing prevailing wage on most construction projects will decrease tax revenues because construction workers will have lower pay, will prolong construction projects because unskilled workers will join the workforce, and will hurt Wisconsin’s state and local economies.
Localities across Waukesha County should be very concerned about the gutting of Wisconsin’s Prevailing Wage Law at the beginning of 2017. Prevailing wage is necessary to prevent government bodies from undercutting the local labor market, and drives economic development in the county.
Conversely, economic hardships in the construction industry and Wisconsin’s economy are expected to occur when the 2015-17 Budget Bill takes full effect. Unfortunately, taxpayers will never experience any of the benefits promised by opponents of prevailing wage in Wisconsin.