Expanding Coverage of Prevailing Wage Standards to More Broadband Projects Would Improve Outcomes

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La Grange, IL: As Minnesota leverages hundreds of millions of dollars in state and federal funding to spur a nearly $2 billion total investment in expanding high-speed internet access to about 160,000 locations over the next six years, a new study has found that the broadband projects receiving taxpayer dollars are underperforming other types of public works construction on economic, workforce, and transparency metrics. The study, by the nonpartisan Midwest Economic Policy Institute (MEPI), links exemptions in the state’s prevailing wage law that exist on most broadband projects to fewer business opportunities for Minnesota-based contractors, lower wages for construction workers, and lower levels of workforce productivity.

Read the study, Broadband Construction Projects and Prevailing Wage in Minnesota, here.

Prevailing wage serves as a local market minimum wage for different types of skilled construction work. The Minnesota Prevailing Wage Act covers virtually all public works construction projects, such as roads, bridges, trails, parks, and state buildings. The Act also applies to broadband construction projects, except for two major loopholes. All “last-mile” projects that connect the broadband service provider’s network to the end-use customer and each “middle-mile” project linking a broadband service provider’s core network to last-mile infrastructure while receiving either a state grant of less than $200,000 or a state loan of less than $500,000 are exempt from prevailing wage standards in Minnesota.

For the analysis, MEPI collected Minnesota Department of Employment and Economic Development (DEED) data on all 294 broadband projects that received taxpayer dollars between 2014 and 2024. These projects had a total value of just over $800 million—of which nearly $350 million was from state grants—and expanded access to 113,000 homes, businesses, farms, and institutions. MEPI then submitted a request for information under the Data Practices Act to the DEED. However, despite serving as the Department responsible for both ensuring prevailing wages are paid and collecting certified payroll records, DEED responded that it did not have a list identifying the projects that were subject to state or federal prevailing wage standards and that it did not have information on the wages and benefits paid on these projects.

MEPI then used publicly available project descriptions to determine the prevailing wage status for 260 of the 294 projects (88%). The data showed that at least 82% of all broadband projects since 2014 have not been covered by prevailing wage standards.

“Prior research has demonstrated how expanding broadband infrastructure can close employment and income gaps between urban and rural areas, between white and nonwhite residents, and between people with and without college degrees,” said Frank Manzo IV, MEPI Economist and author of the study. “Despite a lack of transparency and accountability from state sources, this study shows how broadband’s statutory exclusions from labor standards that apply to other types of public infrastructure projects can reduce work for local businesses, depress earnings for skilled tradespeople, and potentially affect project costs.”

The analysis of DEED awards and project descriptions for the Border-to-Border Grant Program and the Lower Population Density Grant Program from 2014 through 2024 revealed that projects covered by prevailing wage standards cost an average of 28% less per connection than those that were exempt from prevailing wage coverage. The cheaper cost per connection could be due to many factors, such as economies of scale associated with larger broadband projects, but may also indicate that an expansion of prevailing wage coverage could reduce costs for taxpayers and residents in Minnesota.

In addition to project cost per connection served, MEPI used 2017 Economic Census data to identify differences between Minnesota’s power and communication line construction sector—which includes broadband projects, and which typically is not covered by prevailing wage standards—to the road and bridge infrastructure sector—which has almost universal prevailing wage coverage. Manzo found that 63% of total project value in the power and communication line construction sector was awarded to out-of-state firms compared to just 13% of road and bridge investments across the state. He also found that blue-collar construction workers on road and bridge projects were more productive and better-paid, delivering 29% higher value added and earning an average of 19% more in wages and benefits per hour.

“Economic research has consistently found that prevailing wage standards increase the share of construction value performed by local contractors and improve job quality for construction workers,” Manzo added. “Competitive wage rates attract skilled workers, combatting labor shortages and improving craftsmanship, efficiency, and safety on jobsites. By contrast, when no such standards are in place, the process for awarding state tax dollars on vital infrastructure projects can be distorted in favor of out-of-state contractors that employ lower-skilled workers, pay lower wages, and lack core construction competencies.”

To address these economic disparities and improve accountability to Minnesota’s taxpayers, Manzo offered a series of potential policy actions. These include expanding prevailing wage coverage on broadband projects by removing the “last mile” exemption and aligning the project cost threshold to match other types of public works construction, adding prevailing wage and other labor standards into the scoring system that determines which applicants are awarded state broadband grants, and requiring that certified payroll reports be submitted to, and retained by, the Department of Labor and Industry (DLI)—which is responsible for ascertaining prevailing wage rates via a robust and transparent survey process.

“Minnesota’s historic broadband expansion serves a clear public purpose—connecting tens of thousands of homes to high-speed internet and addressing employment and income gaps—and that is why it is supported by hundreds of millions in taxpayer dollars,” Manzo concluded. “But the data is clear that improving state policy to expand prevailing wage coverage to more projects would help maximize broadband investments for the local economy while delivering greater accountability and transparency for taxpayers who are ultimately footing the bill.”

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