Sean O’Leary: Prevailing Wage is a Good Investment for West Virginia
Charleston Daily Mail and Huntington Herald-Dispatch - Over the next few weeks the Legislature will consider repealing or sharply scaling back the state’s prevailing wage law. Read
In place since the 1930s, West Virginia’s prevailing wage law requires jobs on public construction projects pay a minimum wage based on occupation and area, typically from $15 to $30 per hour.
Many state legislative leaders say repealing this law will lower public construction costs and save the state money, despite the lack of any credible evidence showing that this is possible.
While we can all agree that is it important for government to be good stewards of the public purse, repealing our prevailing wage law is not going to get us there.
In fact, it could hurt our state’s economy, make our workforce less skilled and our workplaces less safe, and do nothing to lower construction costs. At least this is what the credible evidence shows.
In an extensive review of the research on state prevailing wage laws, Nooshin Mahalia finds that the weight of the evidence shows no adverse impact of prevailing wage regulations on government contract costs and that “the studies that have found otherwise use hypothetical models that fail to empirically address the question at hand” or take into account the positive benefits of prevailing wage laws.
For example, some studies, like those mentioned by Dr. Cal Kent, fail to distinguish between public and private construction. It turns out, it costs more to build a school than it does a house, regardless of the prevailing wage.
Others, like the study from the conservative Public Policy Foundation, never get around to actually measuring total construction costs, and instead rely on hypothetical “what-ifs.”
Why is that important? Because when studies actually compare public construction costs in states with and without prevailing wage laws, they find no difference. Only by avoiding that obvious data, can a study claim otherwise.
It’s telling then, that the only two studies that have compared school construction costs in West Virginia with other states have found that West Virginia’s construction cost are lower than several nearby states that don’t have prevailing wage laws.
According to a recent analysis by Dr. Michael Kelsay, West Virginia’s average square foot construction costs of elementary and secondary schools were lower than Ohio, Virginia, and North Carolina, all states that do not have prevailing wage laws on these projects.
These findings mirrored an earlier study analyzing school construction costs in Maryland and five other mid-Atlantic states, including West Virginia. The Maryland study also found no statistically significant increase in construction costs associated with prevailing wage regulations.
So, why is there not a big difference in construction costs between prevailing wage and non-prevailing wage states?
For the most part, it is because you get what you pay for. States that have prevailing wage laws usually have a more skilled, productive and experienced labor force. This means public construction projects are completed more efficiently and on time, creating lower costs for the state.
Some proponents of repealing prevailing wage have advocated that wages should be set in the ‘free market.” Pushing aside the fact that government policies already artificially drive up wages in high-level professions like doctors and lawyers, if the prevailing wage is the use of government purchasing power to increase wages and create good paying jobs, then its repeal if the use of government power to cheapen labor and drive down wages. Neither scenario describes a free market, but only one is a good investment for the state.
If West Virginia is interested in saving money on public construction costs, the best thing to do is undertake projects when the construction market is soft and demand is not high.
When demand is down in the construction industry, contractors usually bid lower. Costs savings can also be realized when borrowing costs are low (like now).
West Virginia’s prevailing wage helps ensure that those bidding on public construction projects are competing based on skill, productivity, experience, and quality, rather than who can provide the cheapest labor.
And it also helps ensure that taxpayer-funded construction jobs go to local workers who keep their wages in their community, strengthening our local economies, and not to low-wage workers brought in from out of state.
West Virginia needs policies that create more middle-class jobs, not get rid of the few that we have.