Prevailing Wage Repeal Would Hurt Kentucky’s Economy

Repealing Kentucky’s prevailing wage law would weaken the state’s economy, according to a new study.

Eliminating prevailing wage would cause a pay cut for middle-class workers, qualify more workers for public assistance, slash apprenticeship training, and result in more of Kentucky’s tax dollars going to out-of-state or foreign contractors. Veterans, who populate construction trades at a higher rate than non-veterans, would be particularly impacted if Kentucky were to repeal its prevailing wage standards.

The report was authored by economics professor Kevin Duncan, PhD and Frank Manzo IV, MPP– Policy Director of the Midwest Economic Policy Institute, a division of the Illinois Economic Policy Institute.

Full Report: The Economic, Fiscal, and Social Effects of Kentucky’s Prevailing Wage Law.

Fact Sheet #1: One-page summary of the report.

Fact Sheet #2: One-page summary – version 2.

The preponderance of peer-reviewed economic research finds that prevailing wage laws do not increase construction costs, including three-fourths of all studies over the past two decades. This finding directly disputes the claims of those who advocate for repealing Kentucky’s 76-year-old prevailing wage law. Unfortunately, some prevailing wage opponents are either really bad at math, or they expect the people of Kentucky to work for poverty-level wages.

In fact, the report finds that prevailing wage repeal would lower blue-collar construction worker incomes by 10%, cause 6,100 blue-collar construction workers to lose their employer-provided health coverage, and result in another 10,300 workers losing their pension plan. For 5,700 workers, the wage cut would be so severe that they would fall below the official poverty line. Repeal would thus force thousands of working-class residents onto public assistance programs– increasing costs to Kentucky taxpayers.

Veterans, who are more likely to work in construction, would not be immune to this pay cut. Repealing Kentucky’s prevailing wage standards would result in thousands of blue-collar veterans leaving construction and at least 600 veterans would lose their employer-provided health insurance. Gutting prevailing wage would disproportionately impact veteran workers who served their country.

Prevailing wage repeal would also slash apprenticeship training in Kentucky. Research indicates that repealing prevailing wage reduces apprenticeship training by 38%. In Kentucky, fully 80% of construction apprentices are enrolled in a joint labor-management (union) program. Union programs in Kentucky have a higher completion rate than non-union programs and graduate significantly more veterans. For 76 years, Kentucky’s prevailing wage law has supported these privately-financed training programs and made construction work safer. Repeal would discourage training, increasing fatal and nonfatal injuries.

The cumulative effect of prevailing wage repeal would be a $400 million annual reduction in economic activity and a loss of 2,900 total jobs in Kentucky– including  1,800 direct construction jobs and an additional 1,100 jobs in retail and service industries. State and local tax revenue would also fall by $12.5 million annually. Gutting prevailing wage hurts local contractors, local workers, and taxpayers.

These impacts of repealing prevailing wage echo the conclusions of a 2014 study by economics professor Peter Philips, PhD, who found similar effects.

The consensus is clear: There is no good economic, fiscal, or social rationale for repealing Kentucky’s prevailing wage law.

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