Repeal of prevailing wage has led to a host of negative impacts on workers and the construction industry– including lower wages and more income inequality– while failing to deliver any meaningful cost savings or increased bid competition promised by those in favor of repeal. 

A new report released by the Midwest Economic Policy Institute and Colorado State University economist Kevin Duncan, Ph.D. finds that repeal of prevailing wage– called Common Construction Wage in Indiana– has already hurt the state. The policy, which was repealed in July 2015, was essentially a minimum wage on publicly-funded construction jobs like roads, bridges, schools, and police stations.

The report, The Effects of Repealing Common Construction Wage in Indiana, looked at actual economic data to evaluate the impact of repeal on ten construction market outcomes. The data show that:

  1. Repeal decreased the wages of blue-collar construction workers by 8.5%, on average.
  2. Repeal decreased the wages of the lowest-paid construction workers by 15.1%, contributing to greater wage inequality in construction.
  3. Repeal was statistically associated with a 4.5% increase in the share of workers in construction occupations without a high school diploma.
  4. The share of construction workers who are military veterans fell by 1.2% post-repeal.
  5. Construction worker productivity growth was 5.3% slower in Indiana than in neighboring Midwest states following repeal.
  6. Relative worker turnover increased by 1.2% in Indiana’s heavy and highway construction sector following repeal.
  7. Employment growth in public works construction was 1.5% slower in Indiana than in neighboring Midwest states following repeal.
  8. The average number of bidders on public projects in northern Indiana was 3.0 before repeal and 2.9 after repeal.
  9. Common Construction Wage did not favor union contractors, as the union share of northern Indiana’s public construction market stayed the same or even increased following repeal.
  10. Repeal had no statistical impact on the average cost per public school project in northern Indiana.

 

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State Representative Ed Soliday, Assistant Republican Floor Leader in the Indiana House of Representatives, put it best when he testified that, “[w]e got rid of prevailing wage and so far it hasn’t saved us a penny.”

Repeal has had negative consequences for Indiana. Blue-collar construction worker wages have been cut and lesser-educated individuals have replaced high-skilled workers, contributing to higher turnover rates and lower per-worker productivity levels. Contractor competition has not increased for bids on public construction projects and public school construction costs have not decreased. Ultimately, repeal of Common Construction Wage has not saved taxpayers any money and, in fact, has had negative effects on construction market outcomes in Indiana.

To read the Full Report, click here.

To read an Executive Summary of the report, click here.