Frank Manzo IV: Lawmakers should consider the social cost of construction wage cuts

June 28, 2017
Frank Manzo IV | Policy Director
Midwest Economic Policy Institute

According to the conservative Wisconsin Taxpayers Alliance (WTA), state legislators and Gov. Scott Walker may soon act to cut the wages of private construction workers by as much as 44 percent.

How? By repealing Wisconsin’s prevailing wage law – the minimum wage standard on state-funded construction projects such as highways, bridges, and other critical infrastructure.

What they haven’t told you is that their own numbers suggestthat this could actually cost taxpayers more than $300 million per year. This is the social cost of wage cuts that would remove thousands of Wisconsin’s working families from the middle class.
The math is really quite simple.

According to the Bureau of Labor Statistics data on which WTA’s analysis relies, the skilled construction workers who would be affected by prevailing wage repeal earn an average of $51,000 per year. The 44 percent savings scenario that WTA and their allies in the Legislature and Walker administration have promised would require that average wage to drop to about $29,000 per year.

When you add up all of the health-care, home-heating, and food subsidies for which these workers and their families would then qualify, as well as low-income tax credits and the lost income tax revenue that the state would have to find from other taxpayers, the total cost of Wisconsin’s wage cut exceeds $300 million annually.

How can any legislator – especially those who campaigned on promises of lifting wages and fiscal responsibility – defend such a position?

The short answer is by ignoring basic math, the fundamental realities of the construction industry and the economy, or both.

Construction is dangerous work. When it comes to the things the public relies on – schools, roads, transit systems and water facilities – having well-trained professionals on the job matters. By establishing criteria that reflect local market standards and incentivize contractors to invest in workforce training, research shows that prevailing wage laws dramatically increase local hiring, productivity, efficiency and safety on the worksite. In doing so, they simultaneously reduce waste, and reduce spending on fuels, materials, equipment and purchased services.

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