Look What Happened When Prevailing Wage Was Repealed in Indiana

The Illinois Prevailing Wage Act is good for workers, businesses, and families in Illinois. For proof, all we have to do is look to our neighbors in Indiana, where prevailing wage was repealed in July 2015.

Prevailing wage functions as a local minimum wage on publicly-funded construction jobs like roads, bridges, schools, and police stations. The law stabilizes wages and benefits and creates a level playing field for local contractors. When prevailing wage standards are removed, the middle class suffers most. And that’s what happened in Indiana.

According to a new research, the repeal of prevailing wage– called Common Construction Wage in Indiana– has already hurt the state. After repeal, blue-collar construction workers took a substantial pay cut of more than 8%. And wages were slashed even more for the lowest-paid workers, worsening inequality in the state.

Study: The Effects of Repealing Common Construction Wage in Indiana: Impacts on Ten Construction Market Outcomes.

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By reducing wages and benefits, repeal of prevailing wage attracts less-skilled workers. In Indiana, the share of the construction workforce without a high school diploma has skyrocketed. Meanwhile, construction worker productivity grew 5% slower in Indiana than it did in Midwest states with prevailing wage, such as Michigan, Ohio, and Illinois. The evidence indicates that repeal resulted in an influx of low-skill, high-turnover, and less-safe workers from other states employed on taxpayer-funded projects. The same thing also happened in Gulf Coast states after federal Davis-Bacon prevailing wage standards were temporarily suspended by former President George W. Bush following the devastation of Hurricane Katrina.

All of these on-the-ground facts fly in the face of the absurd claims made by those who oppose prevailing wage. The same tired, old, ideologically-motivated accusations that we hear here in Illinois were lobbied in Indianapolis.

Repeal “could save somewhere between 10 and 20%,” asserted Indiana State Representative Jerry Torr.

Repeal “put taxpayers first, providing much-needed relief to cash-strapped local governments,” said then-Governor and current Vice President Mike Pence.

The actual data, however, show that these accusations were misguided at best, and misleading at worst. Repeal did not lead to more competition. The average public project in northern Indiana had 3 contractors bidding for the work prior to repeal. After repeal? The average was 3 bidders. Worse, repeal has had no effect on the cost of public school projects.

Zero impact. The costs savings promised by those like Pence and Torr were not delivered.

The Assistant Republican Leader in the Indiana House of Representatives, Ed Soliday, put it best last year when he attested:

“We got rid of prevailing wage and so far it hasn’t saved us a penny. Probably the people most upset with us repealing common wage were the locals. Because the locals, quite frankly, like to pay local contractors and they like local contractors to go to the dentist in their own town. … There’s not 22% savings out there when the total cost of labor is 22%. It’s rhetoric. So far, I haven’t seen a dime of savings out of it.”

Both lawmakers and taxpayers in Illinois should heed the warnings of Representative Soliday, the new 2018 report on Indiana, a previous 2013 study on prevailing wage in Illinois, and the preponderance of the peer-reviewed research. Repeal of prevailing wage has negative consequences for our neighbors in Indiana. Wages were slashed, inequality increased, the skills shortage worsened, and productivity fell– all without saving a penny.

Prevailing wage ensures that projects are done right and produces good middle-class jobs for skilled local workers. The result is a stronger economy.

To read The Effects of Repealing Common Construction Wage in Indiana: Impacts on Ten Construction Market Outcomes, click here.

To read an Executive Summary of the report, click here.

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