The Adverse Economic Impact from Repeal of the Prevailing Wage Law in Missouri

180 Pages·2013·4.38 MB·English

by  Devin Smith

The Adverse Economic Impact
from Repeal of the Prevailing
Wage Law in Missouri

Michael P. Kelsay, Ph.D.
Research Associate and Instructor

James I. Sturgeon, Ph.D.
Professor

Kelly D. Pinkham, M.S.
Research Associate

Research Assistants:

Richard T. Wagner, Devin T. Rafferty,
and
Sabina  Lόόpez  Énnen  

A study funded by the Council for Promoting American Business

Conducted under the auspices of:

The Department of Economics
University of Missouri - Kansas City
5100 Rockhill Road
Kansas City, MO 64110

December 2011
1
The Adverse Economic Impact
from Repeal of the
Prevailing Wage Law in Missouri

TABLE OF CONTENTS

Chapter I. Executive Summary Page 9

Chapter II. Introduction to the Study Page 15

Background on Prevailing Wage Law and the Davis-Bacon Act Page 23

History of Prevailing Wage Laws in U.S. States Page 25

Prevailing Wage Legislation - State of Missouri Page 26

Review of Previous Studies Page 28

Chapter III. The Impact of Prevailing Wage Laws on Total Page 39
Construction Costs: North Central States Region

Summary of Findings of All Construction Page 39

Summary of Findings on School Construction Page 40

Summary of Data, Models Used and Detailed Empirical Page 41
Findings from Regression Analysis

The Impact of PW Laws on Total Construction Costs - Page 44
North Central States Region

Descriptive Findings Page 46

The Multiple Regression Model Page 51

Public vs. Private Construction Costs in Prevailing Wage States Page 51

Public vs Private Construction Costs in NonPrevailing Wage StatesPage 52

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Chapter III. (Continued)

Estimation of Prevailing Wage Effects Page 54

School Construction in the North Central States Region Page 57

Chapter IV. The Economic Impact of the Prevailing Wage Statute on the Page 78
State of Missouri

Introduction Page 81

Input -Output Analysis Page 83

Construction Industry in the United States and Missouri Page 87

Expected Loss of Earnings in Construction Due to Repeal of Page 87
Prevailing Wage Laws

State and Regional Impact of Repeal of Missouri Statute Page 89

General Overview of Construction in Missouri Page 90

Cost and Benefits to the State of Missouri Resulting from Page 94
Repeal of Prevailing Wage Legislation

Multiplier Effects Page 98

Multiplier Effects for the State of Missouri Page 99

Analysis of Impacts of Repeal on Missouri Regions Page 102

Chapter V. Impact of Prevailing Wage Laws: Upon Benefits, Training, Page 118
Safety, Productivity

Health Care and Pension Benefits Page 121

Skills Training and Apprenticeship Page 128

On the Job Safety - Injuries and Fatalities Page 132

Productivity in the Construction Sector Page 137

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Chapter VI. Economic Impact of Right-to-Work Laws Page 143

Introduction Page 145

Previous Research Findings Page 146

Research Findings Page 148

Conclusions Page 158

Chapter VII Summary and Conclusions Page 159

References Page 163

Appendices Page 174

4
The Adverse Economic Impact
from Repeal of the
Prevailing Wage Law in Missouri

TABLES AND MAP

Section II Introduction to the Study

Map County Groupings for Multiplier Analysis Page 18

Table II.1 Prevailing Wage Status by State Page 24

Section III The Impact of Prevailing Wage Law on Total Construction Costs:
North Central States Region

Table III.1 Regression Results - I Page 52

Table III.2 Regression Results – II Page 56

Table III.3 Regression Results – School Construction Page 58

Table III.4 Summary Statistics on School Construction Page 60

Tables III-A:III-O Square Foot Costs of Construction by State Pages 63-77

Section IV. The Economic Impact of the Prevailing Wage Statute on State of Missouri

Table IV.1 RIMS II Multipliers Page 82

Table IV.2 Sample Input-Output Transaction Table Page 84

Table IV3 Sample Technical or Direct Impact Coefficients Page 85

Table IV4 Direct or Indirect Requirements Matrix Page 86

Table IV.5 Impact on Wages and Employment in Construction Page 95

Table IV.6 Construction Income and Employment: Region 1 Page 103

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Table IV.7 Construction Income and Employment: Region 2 Page 93

Table IV.8 Construction Income and Employment: Region 3 Page 95

Table IV.9 Construction Income and Employment: Region 4 Page 98

Table IV.10 Construction Income and Employment: KC MSA Page 100

Table IV.11 Construction Income and Employment: St. Louis MSA Page 103

Section V. Impacts of Prevailing Wage Laws upon Benefits,
Training, Safety, and Productivity

Table V.1 Comparison of Average Wages, benefits, and
Wage Benefit Mix Page 115

Table V.2 Distribution of Apprenticeships by the Prevailing
Wage Law Regime page 120

Table V.3 Total Cases – Injuries and Illnesses Page 124

Table V.4 Total Lost Workday Cases Page 125

Table V.5 Total lost Workday Cases with days Away from Work Page 126

Section VI. Economic Impact of Right-to-Work

Table VI.1 Status of RTW Laws in the United States Page 136

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The Adverse Economic Impact
from Repeal of the
Prevailing Wage Law in Missouri

CHARTS

Section III: The Impact of Prevailing Wage Law on Total Construction Costs:
North Central States Region

Chart III.1 Costs of Private Construction: 2003-2010 Page 48

Chart III.2 Costs of public Construction: 2003-2010 Page 48

Chart III.3 Costs of Public versus Private Construction in
Non Prevailing Wage States Page 49

Chart III.4 Costs of Public versus Private Construction in
Prevailing Wage States Page 49

Chart III.5 Average Square Foot Costs of Construction
State of Missouri v. Non Prevailing Wage States Page 61
Elementary School Construction

Chart III.6 Average Square Foot Costs of Construction
State of Missouri v. Non Prevailing Wage States Page 61
Secondary School Construction

Chart III.7 Average Square Foot Costs of Construction
State of Missouri v. Non Prevailing Wage States Page 62
University School Construction
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Section IV. The Economic Impact of the Prevailing Wage Statute on State of Missouri

Chart IV.1 Average Construction Income by Prevailing Wage Status Page 88

Chart IV.2 Average Construction Income by Prevailing Wage Status Page 89

Chart IV.4 State of Missouri. Costs of Public and Private
Construction. 13 Structure Types Page 92

Chart IV.5 State of Missouri. Costs of Public and Private
Construction. Schools, Libraries, and Labs Page 93

Section V. Impacts of Prevailing Wage Laws upon Benefits,
Training, Safety, and Productivity

Chart V.1 Plot of Average Wage Rate and Average Cost per Mile:
1980-1993 Page 140

Chart V.2 Plot of Average Wage Rate and Average Cost per Mile:
1994-2002 Page 141

Section VI. Economic Impact of Right-to-Work

Chart VI.1 Regional manufacturing Employment: 2000-2010 Page 150

Chart VI.2 Percent of Workers with Employer Based Health Insurance Page 151

Chart VI.3 Per Capita Gross State Product Page 152

Chart VI.4 Percent of Population Uninsured page 153

Chart VI.5 Percent of Population Graduating from High School Page 154

Chart VI.6 Household Income Page 155

Chart VI.7 Percent of Population Living at or below Poverty Level Page 155

Chart VI.8 Percent of Population at or below the Minimum Wage page 156
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Chapter I

Executive Summary

  The  attempts to repeal the prevailing wage law in Missouri are based upon the
claim that repeal with save dollars on total construction costs and will bolster state and
local budgets. In 2004, we conducted an in depth study of the impact of the repeal of the
prevailing wage in Missouri. In 2004, we showed that the repeal of the prevailing wage
statue in Missouri would not save dollars on construction costs but rather would result in
a negative impact on families, taxpayers, and the state and regional economics in
Missouri. Utilizing data from the F.W. Dodge Company on construction costs in the
North Central States region, we update our previous report for the period 2003-2010 on
the impact of the prevailing wage statute in Missouri. Our update of 2011 has shown that
Missouri’s prevailing wage laws do not raise the cost of construction. Our examination of
both the short and long-term effects of prevailing wage show positive and substantial
impacts on construction workers, their families, other industry participants and their
families, and state, county, and local revenue streams.
1. Opponents of the prevailing wage statute argue that the repeal of the prevailing
wage statute would save dollars on construction costs and would bolster state,
local, and county revenue streams.

Study Finding #1
• The repeal of the prevailing wage statute would cost the residents of Missouri
and their families between $300.3 million and $452.4 million annually in lost
income.
• The repeal of the prevailing wage statute would cost the State of Missouri
between $5.8 million and $8.7 million annually in lost sales tax collections.
• The repeal of the prevailing wage statute would cost the State of Missouri
between $18.0 million and $27.1 million annually in lost income tax revenues.
• The total economic loss due to the repeal of the prevailing wage law in
Missouri would be a loss of income and revenue between $324.1 million and
$488.2 million annually.
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2. Opponents of prevailing wage statutes argue that prevailing wage laws increase
the costs of public construction due to the impact of higher wage rates on total
construction costs. Repeal opponents argue that the increased costs to states as a
result of prevailing wage statues ranges from 10%-30% of total construction
costs.
Study Finding #2

• The F.W. Dodge Company provided us with the bid price on 150,482
observations for the period 2003-2010 in the twelve states North Central
States Region across thirteen different structures.
• In the North Central States Region, there are eight prevailing wage states
and four non-prevailing wage states.
• For the period 2003-2010, the mean square foot costs of construction in
prevailing wage states was $150.37; for non-prevailing wage states, the
mean square foot costs of construction was higher at $160.11. There is no
statistical difference in the mean square foots costs of construction.
• The costs of public construction are higher that the costs of private
construction in both prevailing wage states and non-prevailing wage
states.
• There is no statistical difference in the mean square foot costs of public
construction in prevailing and non-prevailing wage states.
• Given that labor costs account for approximately 25% of total construction
costs and have been decreasing over time, the claim of 15%-30% savings
with the repeal of the prevailing wage statute is not possible.
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