Analysis of studies cited by advocates of prevailing wage repeal highlights massive social costs
FOR IMMEDIATE RELEASE: June 19, 2017
Wednesday, May 31, 2017
Madison: While critics of Wisconsin’s prevailing wage law have long claimed that repeal would save money by cutting the wages of blue-collar construction workers, a Midwest Economic Policy Institute (MEPI) analysis of two reports frequently cited to support the claims of prevailing wage critics shows that repeal could actually cost Wisconsin taxpayers over $300 million each year.
For its study, MEPI examined how construction wage cuts would affect overall state tax revenues and reliance on five different government assistance programs utilizing the Wisconsin Taxpayers Alliance’s recent claim of a 44% cut, and a 2015 Wisconsin Legislative Fiscal Bureau analysis that suggested repeal of prevailing would reduce wages by 14.1%.
“If an entire segment of Wisconsin’s blue-collar workforce faced a wage cut of 14% to 44%, it would mean thousands more Wisconsin workers would be on government assistance, and Wisconsin’s state government would have significantly less tax revenue to pay for these benefits,” said MEPI Policy Director Frank Manzo IV. “Using the wage cut figures promised by the law’s critics, we can assess that prevailing wage repeal would impose a potential social cost to Wisconsin taxpayers of hundreds of millions of dollars each year-without producing any real savings in total project costs.”
The current average wage for skilled construction workers, on which MEPI’s analysis is based, is $51,600 per year. The 44% wage cut claimed by the Wisconsin Taxpayer Alliance would reduce this average to less than $29,000 per year for those employed on public works projects. This would leave affected construction working families of four eligible for well-over $16,000 per year in government subsidized health, food and heating assistance, plus another $5,000 per year in Earned Income Tax Credits (EITC). The reduction in wages would also reduce their state and federal income tax payments by an average of $4,800 per year, for a potential annual social cost of more than $26,000. Similarly, a 14% wage cut would result in a potential social cost of over $17,000 per year for a family of four.