Prevailing Wage Encourages Self-Sufficient Workers

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at or follow ILEPI on Twitter @illinoisEPI.

Taxpayers are subsidizing the low-wage, low-skill, low-quality system in states without a prevailing wage law, according to a report released jointly today by the Midwest Economic Policy Institute and Building Strong Communities.

The Policy Brief, Self-Sufficient Construction Workers: Why Prevailing Wage Laws are the Best Deal for Taxpayers [PDF], finds that prevailing wage laws (PWLs) build local middle-class jobs and drive economic development through increased consumer demand. By paying a living wage and supporting apprenticeship training programs, PWLs encourage high-skilled workers to enter the construction labor market and build projects right, on time, and within budget.

In addition to promoting high quality, prevailing wage laws contribute positively to government budgets. Construction workers earn more in PWL states. Better wages mean a stronger tax base, helping policymakers balance budgets without the need to raise taxes. In fact, construction workers earn 8.0 percent more in PWL states but actually contribute 35.7 percent more in federal income taxes after credits and deductions compared to their counterparts in non-PWL states.

Construction workers in states without a prevailing wage law receive disproportionately more government assistance than those in PWL states. Construction workers in non-PWL states account for 24.6 percent of tax contributions among blue-collar construction workers but receive a larger share of government assistance: they get 33.0 percent of all Earned Income Tax Credit assistance and 31.8 percent of all food stamp benefits paid to all blue-collar construction workers. They are also more likely to live in public housing (by 0.4 percentage points), more likely to receive food stamps (by 1.6 percentage points), less likely to have a pension plan at work (by 5.6 percentage points), and less likely to have health insurance (by 4.1 percentage points)– which increases reliance on taxpayer support through emergency room care during times of illness or injury.

Additionally, construction workers in non-PWL states receive $0.603 in non-health, non-retirement government assistance for every dollar of federal income tax contributions compared to just $0.580 per dollar for PWL workers. The comparable figures for Indiana and Illinois– states with “strong” prevailing wage laws– are even starker: $0.543 per dollar and $0.272 per dollar, respectively. Simply put, construction workers are self-sufficient in PWL states while taxpayers subsidize the low-skill, low-quality model of construction employment in non-PWL states.

Prevailing wage laws are the best deal for taxpayers. They should be strengthened or enacted in states across America to protect the middle class and support strong budgets at no additional expense to the taxpayer.

Full Report:

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