Tag Archives: prevailing wage

STUDY: Prevailing Wage Adds 17,500 Jobs to California Economy

Prevailing Wage policies add 17,500 jobs and $1.4 billion in output across California’s economy, according to a new study released by Smart Cities Prevail – a leading construction industry education and research organization.  

Entitled, Building the Golden State-The Economic Impacts of California’s Prevailing Wage Policy, the first-of-its-kind report was co-authored by Colorado State University-Pueblo Economist Dr. Kevin Duncan and Smart Cities Prevail Researcher Alex Lantsberg. The study was conducted using IMPLAN software (the industry standard for analyzing the effects of government policy choices on the economy) to model the impact of eliminating California’s prevailing wage standards.

In addition to measuring the policies’ impact on job creation and overall economic output, the study also concludes that prevailing wage policies facilitate broad improvements to the construction industry as a whole–including substantial reductions in materials waste and dramatic increases in both local hiring and overall workforce productivity.

To Download the Full Report, Click Here.

“While past research has already concluded that prevailing wage promotes workforce development, safer job sites, less dependence on public assistance, and has only negligible impacts on project cost, these new findings show the value of these standards both to the construction industry and our economy as a whole,” said Dr. Kevin Duncan.  “From creating jobs to increasing efficiency, it is clear that prevailing wage policies provide taxpayers with a far better return on investment than the less beneficial alternative.”

While California has recently enacted new legislation (SB 7) to encourage more of its cities to enact prevailing standards, several other states-including Nevada, Wisconsin, Indiana, and Michigan–are either considering or have recently passed laws to weaken prevailing wage requirements on public works.

“This study provides important context for the recent changes to California’s prevailing wage laws, but also for the debates that are happening in other states across our country,” Lantsberg said.  “The data shows that the decision to weaken or eliminate prevailing wage is a choice that can increase poverty, export more tax dollars out of state, and eliminate thousands of jobs in the process.”  

Lantsberg added, “It’s important to note that this study focuses on the benefits of the state prevailing wage policy, but does not analyze the additional positive benefits that come from federal and local policies.  For example, the state and federally funded high speed rail project in California is estimated to create 20,000 prevailing wage construction jobs in the first 5 years of construction, and tens of thousands more in the years that follow.”

Consequences of Prevailing Wage Elimination in California:

– Gross job losses of 48,500 and net job losses of 17,500

– 3%-5.5% increase in out-of-state contracting

– State Economic output reduced by $1.4 billion

– Real income reduced by $1.5 billion

– More construction professionals living at or near the poverty line.

– 12% decline in workforce productivity and 5% increase in materials waste

Kevin Duncan, Ph.D. is a nationally recognized economist specializing in labor and regional economics.  Dr. Duncan currently works as a Professor of Economics in the Hasan School of Business at Colorado State University – Pueblo and Senior Economist at BCD Economics, LLC.  he teaches regional economics where his students learn economic impact analysis.

Alex Lantsberg is a researcher with Smart Cities Prevail specializing in economics, land use, and urban planning.  Mr. Lantsberg holds a Master’s Degree in City Planning from the University of California, Berkeley and an undergraduate degree in finance from Northern Illinois University.

Prevailing Wage is the standard rate paid on publicly funded projects to a worker in a given trade, in a given region.  Prevailing wage laws were first established federally and in some states in the 1930s – and supported by leaders from both political parties – in order to raise the quality of government funded construction projects and encourage more local hiring.  

Smart Cities Prevail is a non-profit 501(c)(4) organization and California’s leading research and informational resource on prevailing wage.   For more information, visit www.smartcitiesprevail.org.

Charter: What Savings?

And they say Charters save money….  

DC-based lobby groups have long claimed that cities could save implausible amounts of money by chartering in order to eliminate prevailing wage on locally-funded city construction projects.  

Because we deal in fact-based reality, we have known from the start that these claimed savings were not in the realm of possibility.  

Now it seems that even those who have followed this risky path to charter are seeing the error of their ways.  

For the second time in as many years, the City of Costa Mesa is considering placing a charter on the ballot that would eliminate prevailing wage – and the middle class jobs that come with it – on city funded building projects.  They are doing this even though 60% of voters rejected this idea at the ballot last November.  

As part of their drafting process, Costa Mesa sent questionnaires to other cities inquiring about their local prevailing wage policy and its effects on the bottom line.  

The response from the City of Carlsbad says all that cities considering charter really need to know on the subject.  

When asked what savings were realized by paying workers less, Carlsbad responded:   “We have found savings to be hard to ascertain.  Bid prices may be lower on the front end but there is some suspicion that total project costs may impact initial savings (change orders, costly project delays, more labor by city employees, etc.)”  

They went on to say that they have not determined an accurate method of calculating savings in the first place.  

How could the huge savings claims be real if they aren’t significant enough to be measured?  

The fact remains that if cities want to get the job done for a good value, on time and on budget, the safest bet with taxpayers’ money is to go with prevailing wage contractors.  Prevailing wage workers are the most skilled in their fields, and the result is a safe and efficient workplace that gets the project done right – on the first try.  

Costa Mesa is moving forward with a charter scheme that would eliminate prevailing wage – costing that city countless middle class jobs – even after hearing from Carlsbad and a host of other sources that the potential savings by pursuing this policy are imaginary.  They have fallen for the hype from the DC lobbyists, and once again it looks like it is going to be up to local voters to reject the flawed proposal for what it is – a risky scheme that could hurt the city, and only help politicians who want more power.  

The verdict is in, and it says that prevailing wage is no more expensive and produces a reliable product at a good value for taxpayers – all while producing middle class jobs that are the backbone of local economies.  

The real question is why would politicians choose a path that saves no money, opens the door to lawsuits, deficit spending, and higher taxes, and in some cases like the fiasco in the City of Bell, can lead to financial ruin and rampant corruption.  

These are risks that clearly outweigh any perceived reward, and cities should proceed with caution, or they could become the next front page story. – See more at: http://smartcitiesprevail.org/…

As We Celebrate Labor Day

As we celebrate Labor Day this week, we wanted to take a moment to thank the hard working construction workers who literally built our state.

Recently, the Los Angeles Times published a list of the 10 most dangerous jobs in America.  Four of the 10 were jobs in construction related fields.

Just last week, The San Francisco Chronicle reported on the fatality of a worker in Berkeley while laying asphalt at a school.  This and stories like it are why our fight to protect prevailing wage is so important.

We all know about the benefits of prevailing wage to families who find a ladder to the Middle Class and the higher quality of buildings built by prevailing wage workers, but often the safety argument doesn’t get enough attention

The fact remains that construction jobs are dangerous, and prevailing wage leads to training and standards that make the jobs much safer. .  Apprenticeship programs supported by prevailing wage provide a framework for years of training so that workers learn the most efficient and safest possible way to practice their tradecraft.

A study of what happened when the State of Kansas repealed prevailing wage statewide, and the results were grim.  Serious injury rates increased by 21%.  If that wasn’t enough, income fell by 10%, apprenticeship training fell by 38% overall, and 54% for minorities.

Given these facts, it’s not surprising that three recent polls showed overwhelming support for prevailing wage in California – both statewide and in San Diego where projects covered by prevailing wage were just expanded.

When opponents argue to repeal prevailing wage, they fail to mention the staggering risk to workers, their families, and their community.  Right now, they are lobbying to eliminate prevailing wage city-by-city by convincing cities across California to pass hastily crafted, unnecessary charters – even though the facts are stacked against them.

So as we consider Labor Day, we thank those who put their life on the line to build California’s future, and recommit our efforts to help community leaders and the public understand what is at stake in our fight to protect and grow the Middle Class, and I can think of no better way for you to show your appreciation than to sign our petition to protect prevailing wage.


If off-shoring of manufacturing burns you up, so should the elimination of prevailing wages in construction

For years we’ve been hearing about the devastation caused by the off-shoring of manufacturing capacity.  Families that were firmly in the middle class experienced dramatic declines in their standards of living as their jobs were shipped off to a far off location where the work would be done at a fraction of the cost because the CEOs could pay workers a pittance while evading the costs of keeping the air and water clean.  When the left-behind workers found new jobs, the wages and benefits were nowhere near what they had lost.  As families became poorer, communities suffered as their coffers emptied because residents had far less to spend back in town.  Entire industries and the technical know-how of their workforce have disappeared in the United States.

All of this has rightfully made many Americans angry.  But while the most noticeable impacts of off-shoring have been concentrated in a few states in the industrial Midwest, the elimination of prevailing wages in construction has the potential to bring these problems to California.  At first blush the comparison between construction and manufacturing does not seem to fit.  However a deeper look at the construction industry, its hiring practices, its skill base, and the stabilizing role of prevailing wages shows that the comparison is right on target.  

Two defining characteristics of the construction industry are its seasonality and impermanence. Major work is typically scheduled to occur between the spring and autumn to take advantage of the weather, with significant downturns in the winter months.  These are challenges for both contractors and the men and women they employ.

For contractors the stakes are extraordinarily high.  Since the level of work waxes and wanes, a contractor cannot simply carry a large payroll when there’s no work.  Instead, they need to be able to “hire up” to meet their workforce needs when times are good and scale back when they’re not working.  When the time comes to bid on a major public works job they need assurance that they can fill their labor needs with skilled workers who can do the job quickly and do it well.

Construction workers, especially those working in smaller markets, face the flipside of the contractors’ problem.  Since work is irregular they often have to earn enough in those eight months to get them through what are virtually guaranteed lean times.  And because construction projects eventually come to an end with the next job far from guaranteed these workers need an incentive to stick with the industry when the tide is out.  

Prevailing wages serve that stabilizing role for the industry by ensuring that skilled construction workers are able to earn a decent wage that will carry them through a year’s ups and downs and accrue health, retirement, and vacation benefits that give them a measure of security.  Training payments, which are part of most prevailing wage determinations, are invested into programs – both union and non-union – that enable workers to upgrade their skills and also prepare new apprentices for careers in the building trades.  This structure maintains the skill base needed to build public works to exacting specifications and develops a pipeline of skilled workers to replace those aging out of the industry.  And even more important for local communities, it maintains a tax base that supports the general funds that provide much needed public services for our cities.

Eliminating prevailing wages invites out of area contractors that don’t have to compete based on local standards and undoes this web of mutual relationships, thereby undermining the entire construction industry’s long-term stability.  This sets off a chain reaction that mimics the dynamics we’ve seen in the industrial Midwest with one crucial difference.  While new industries can arise to take the place of those that have left, construction must by its very nature remain localized.  Without strong standards the industry becomes caught up in a downward spiral that drives down incomes for local construction workers and pushes skilled craftspeople away in search of a stable livelihood, destroying the industry’s skills base and ultimately dragging our local economy down with it.

California communities don’t have to go down this road.  By maintaining prevailing wage standards Cities will support their local construction industry and their local economies and avoid the disinvestment and devastation that has wrought such damage on the nation’s industrial heartland.