In her June 5 column, "Californians getting false choices," Assemblywoman Shannon Grove offered Californian readers the falsest choice of all, claiming that paying prevailing wage to workers on public works projects drives up costs.
Reams of academic studies and decades of real-life experience prove she's completely wrong.
Most recently, a new study from Working Partnerships USA, funded by the construction industry, found that payment of prevailing wage on public works projects in San Jose has provided an array of economic benefits to the region -- including a more robust economy, a higher tax base, and 1,500 new construction jobs -- while actually lowering construction costs. (See www.wpusa.org.)
Making an apples-to-apples comparison, that study found that due to higher productivity and efficiency, a Gilroy public library built with prevailing wage cost just $326 per square foot, while a similar library in Palo Alto built without prevailing wage cost $430, a savings of 25 percent resulting from prevailing wage! Further, the benefits to the local economy were far greater in Gilroy, where 71 percent of the project value went to local contractors, compared with only 12 percent in Palo Alto.
The study further proved that when prevailing wage was not paid, the workers' loss of income rippled through the economy and resulted in reduced consumer spending and a drop in employment in the retail and service sectors.
In the city of Irvine, in the heart of conservative Orange County, contractors urged City Council members to pay the prevailing wage on public works projects. They cited, from their personal business experience, the higher quality of work and greater long-term value and efficiency from workers attracted by the prevailing wage. The Irvine City Council, which had previously exempted itself from prevailing wage requirements, learned from its experience and voted in April to restore the requirement.
In fact, an analysis of data from the Federal Highway Administration by the Construction Labor Council proved conclusively that in states that paid hourly wages below the prevailing wage for highway construction, per-mile costs actually increased significantly because of a major drop in productivity. The states that paid the lower hourly wages ended up paying for 50 percent more hours of work, resulting in a cost increase to taxpayers of $30,000 per mile.
This study demonstrated that skills and productivity, not wage rates, are what actually determine an overall project cost.
In 2008, the Economic Policy Institute reviewed all the academic research of prevailing wage and found: "A growing body of economic studies finds that prevailing wage regulations do not increase government contracting costs." It further concluded that prevailing wage laws "provide social benefits from higher wages and better workplace safety, increase government revenues, and elevate worker skills in the construction industry."
Other states that have repealed their prevailing wage laws have suffered an immediate loss of tax revenue, and no savings in construction costs. In Utah, for example, bids were lowered because without prevailing wage, some contractors jettisoned their training and apprenticeship programs to get the low bid. The result was a poorer quality of work, causing massive overruns and delays, which more than obliterated any hoped-for savings from paying lower wages. That study, "Losing Ground: Lessons from the Repeal of Nine 'Little Davis-Bacon' Acts," by economics professor Peter Philips of the University of Utah, found similar outcomes in other states that repealed their prevailing wage laws.
In state after state, paying prevailing wage results in more highly skilled and productive workers, effective training and apprenticeship programs, higher wages and a healthier business climate, and more government revenue. And it does not increase government construction costs.
Assemblywoman Grove offers a false choice when she says it does. She happens to be CEO of Continental Labor and Staffing Resources, a supplier of temporary, low-paid construction workers. Apparently she places higher profits for her own business above the best interests of taxpayers and local residents.
Bob Balgenorth is president of the State Building and Construction Trades Council of California, which represents 350,000 workers in California's construction industry.