NEW STUDY: Montana Wage Law Strengthens Economy, Boosts Safety and Skilled Labor Supply For Construction Projects

La Grange, IL:  Montana’s construction workers have higher job quality, are more likely to complete apprenticeship training, and deliver superior safety outcomes than those in neighboring states due to the state’s prevailing wage law, according to new research by the Illinois Economic Policy Institute (ILEPI), Colorado State University–Pueblo Economist Dr. Kevin Duncan, and Alma College Economist Dr. Matthew Hinkel.

Read the Study: The Impact of Montana’s Prevailing Wage Law: Effects on Costs, Training, and Economic Development.

Montana’s prevailing wage law establishes minimum wage and workforce training standards for skilled craft workers employed by bidders on publicly funded construction projects like roads, bridges, and schools. Hourly rates are based on surveys of wages and apprenticeship investments for workers performing comparable work in the region. A total of 28 states plus the District of Columbia have prevailing wage laws covering state and local construction expenditures, with federal expenditures governed by the Davis-Bacon Act.

Montana’s law currently covers state and locally funded construction projects (including bridges, schools, highways and related infrastructure) greater than $25,000, requires that at least 50 percent of the workers employed by contractors be residents of Montana, and includes pay incentives that enable Montana’s skilled craft workforce to travel to more rural or remote areas of the state.  The neighboring states of North Dakota, South Dakota, and Idaho—to which Montana was compared for the study—do not have prevailing wage laws.

“Our research concludes that Montana’s prevailing wage law boosts construction worker earnings and employer-provided health insurance coverage by 8%, grows the state’s economy and tax base, increases completion rates from apprenticeship programs that attach skilled workers to in-demand careers by 21%, and reduces costly safety problems on the jobsite by as much as one-third,” said ILEPI Executive Director and study coauthor Frank Manzo IV. “In total, we find that the law enhances returns on Montana’s public construction investments without increasing their cost.”

In 2021 and 2022, multiple legislative proposals that would have either weakened or repealed Montana’s prevailing wage law were voted down, with similar efforts both occurring and expected again this year. While such efforts are often pitched under a pretense of saving money on public projects, researchers noted that more than 90% of peer-reviewed studies of prevailing wage laws have concluded that they do not increase public construction costs.

“The research conclusively shows that prevailing wages do not increase the overall cost of public construction projects,” said study coauthor and Distinguished University Professor of Economics at Colorado State University–Pueblo Dr. Kevin Duncan. “This is because labor represents less than a quarter of total project costs, and investments in job quality and apprenticeship training are offset by savings linked to higher workforce productivity, better safety outcomes, and more efficient use of fuel, equipment, and construction materials.”

Dr. Duncan noted that these academic findings also align with the experiences of states that recently repealed their prevailing wage laws and have since had their elected officials, contracting authorities, or other state agencies confirm that no cost savings ever materialized.

In addition to improving job quality and stabilizing construction costs, prevailing wage laws have consistently been found to boost the economy—both through consumer spending by blue-collar construction workers and by increasing the share of public works projects awarded to in-state contractors. This increase can vary depending on the “coverage threshold,” or the minimum project value required to trigger prevailing wage standards. 

For their analysis, Manzo, Duncan, and Hinkel incorporated Montana’s current coverage threshold of $25,000, U.S. Census, and BLS data into an industry-standard IMPLAN analysis to assess the impact of Montana’s prevailing wage law on the economy, as well as public budgets.

“The existence of a prevailing wage law with a reasonable coverage threshold means even more projects are being completed by contractors and workers from Montana, and this project spending ultimately ripples throughout all sectors of the economy,” said study coauthor and Alma College Assistant Professor of Economics Dr. Matthew Hinkel. For Montana, this translates to nearly 2,000 additional jobs, an increase in the state’s overall economic output by nearly a quarter of a billion dollars annually, and a $19 million annual boost in state and local tax revenues.

Concluding that Montana’s current prevailing wage law delivers superior workforce development, safety, and economic outcomes relative to neighboring states where no such laws exist, researchers encouraged Montana lawmakers to maintain or even expand its existing prevailing wage law.

“The national effort to build trillions of dollars in infrastructure in the face of a historically tight construction labor market will rely on policies that deliver quality jobs, stronger communities, and maximum value for taxpayers,” Dr. Duncan concluded. “The data shows that Montana’s prevailing wage law has the state uniquely positioned for success on each of these metrics.”  

The Illinois Economic Policy Institute (ILEPI) is a nonprofit organization which uses advanced statistics and the latest forecasting models to promote thoughtful economic growth for businesses and working families.