According to a study conducted at the University of Missouri-Kansas City in 2004 that examined the repeal of the Prevailing Wage Law in Missouri (The Adverse Economic Impact from Repeal of the Prevailing Wage Law in Missouri), repealing the prevailing wage statute in Missouri would not save dollars on construction costs.
Repealing prevailing wage laws would have negative economic impact on families in Missouri, taxpayers in Missouri and the state and regional economies in Missouri. The study also concluded that repealing prevailing wage laws would:
- Lower wages for all construction workers in Missouri (direct impact of repeal in Missouri) and reduced incomes for other workers in industries located in Missouri (the indirect, or induced, impact of repeal.)
- Reduce health and pension benefits for construction workers in Missouri (and, as a result, probability of eventual increased costs to state and local communities).
- Reduce sales tax revenues to the State of Missouri between $5.7 million and $6.9 million.
- Reduce revenue from income taxes between $17.7 million and $21.4 million annually.
- Result in a total economic loss of between $317.8 million and $384.2 million annually.
- Weaken system of construction apprenticeship training in Missouri.
- Increase occupational injuries and their associated costs in Missouri.
- Increase construction work done by out-of-state contractors in Missouri.
- Lower productivity of the construction workforce, resulting in higher overall construction costs.
In 1987, the state of Kansas repealed its prevailing wage law. As a result, Kansas has suffered serious and long-term economic problems directly related to the repeal of its prevailing wage law. In 1998, University of Utah Economics Professor Peter Philips prepared a report for the Kansas Senate Labor and Industries Committee. That report, Kansas and Prevailing Wage Legislation, made a 15-state comparison in the Great Plains between states that have prevailing wage laws, those that have repealed prevailing wage laws, those that have judicially annulled prevailing wage laws and those that never had had a prevailing wage law. The results of the study are dramatic. Included in Philips’ findings are these facts:
- Wage incomes in Kansas construction fell by 10% not just on public works but across all construction.
- Employer pension and health insurance contributions fell by 17%.
- While almost all construction workers covered by collective bargaining in Kansas receive health insurance and employer pension contributions, only 10% of the workers in the open (or merit) shop receive pension coverage and only 4% receive health insurance from their employer.
- Apprenticeship training in Kansas construction fell by 38% after repeal. Minority apprenticeship training in Kansas fell by 54%.
This was due to a shift away from collective bargaining towards open shop (or merit shop) construction. Open shop contractors account for only 12% of all apprenticeship training in Kansas. As the open shop share of the market grew after repeal, apprenticeship training fell substantially.
With lower wages and benefits and less training, a new, younger, less-skilled, less-experienced work force entered Kansas construction. Serious-injury rates in Kansas construction rose by 21% after repeal of the state prevailing wage law.
While the pain of repeal is real and measurable, the projected gain from repeal–a 6% to 17% savings on state construction costs–failed to materialize. Elementary school, middle school and high school new construction costs are virtually identical between Great Plains states with and without prevailing wage laws.