Chris IKORCC Prevailing Wage Presentation
Content
Prevailing
Wage
And
Applications
to
Indiana’s
Common
Construction
Wage
Prevailing
Wage
Laws
Among
Oldest
Labor
Market
Regulations
• 1868
8-‐Hour
Day
Law
prevailing
wage
provision
• 1891
Kansas
prevailing
wage
law
on
public
works
• 1931
Davis
Bacon
Act
– Senator
John
Davis
(Republican—PA)
– Rep.
Robert
Bacon
(Republican—NY)
– President
Herbert
Hoover
(Republican
IA)
• 1935
Indiana
prevailing
wage
law
(now
Common
Construction
Law)
– Public
jobs
now
>$350,000
total
construction
cost
2
Workers
Benefit
from
Prevailing
Wages
Higher
wages
Personal
and
family
health
insurance
Pension
coverage
Workers
comp
&
unemployment
insurance
coverage
3
As
Wages
Rise,
Contractors
Substitute
Capital
for
Labor
Source:
US
Census
of
Construction,
2002
$150,000
$140,000
Value added per construction worker
Rented machinery per worker
$4,000
$3,000
$2,000
R Sq Linear = 0.193
$1,000
$130,000
$120,000
$110,000
$100,000
$90,000
R Sq Linear = 0.261
$80,000
$25,000.00
$30,000.00
$35,000.00
$40,000.00
$45,000.00
Average construction worker income
Higher
wages
lead
to
more
machinery
per
worker
in
construction
$1,000
$2,000
$3,000
$4,000
Rented machinery per worker
More
machinery
per
worker
leads
to
higher
value
added
per
worker
4
High-‐wage,
capital
intensive
construction
raises
labor
productivity
Shovels
vs.
Backhoe
Wheel-‐
barrow
vs.
Cement
truck
5
High
Wage
Industries
Need
High
Wage
Construction
University
of
Iowa
Research
Park
BioVentures
Center
World
Class
Competitive
Industries
Require
World
Class
Infrastructure
•
•
•
Local
construction
capabilities
enable
or
constrain
the
industries
which
rely
on
modern
infrastructure
US
Biotechnology
Clusters
Prevailing
wage
law
states:
–
•
Seattle,
USA
San
Francisco,
USA
Los
Angeles,
USA
San
Diego,
USA
Minneapolis/St.
Paul/Rochester
USA
Austin,
USA
Boston,
USA
New
York/New
Jersey,
USA
Philadelphia,
USA
Baltimore/Washington,
DC,
USA
No
law
states
–
Research
Triangle
NC,
USA
•
http://www.mbbnet.umn.edu/scmap/
biotechmap.html
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
6
Taxpayers
Benefit
from
PW
Benefits
• Construction
workers
are
5-‐7%
of
labor
force
– When
construction
workers
get
health
insurance,
less
pressure
on
public
health
system
– When
construction
workers
get
pensions,
less
pressure
on
public
care
for
the
elderly
– When
contractors
pay
into
workers
comp
&
unemployment
system,
funds
remain
viable
7
Las
Vegas
Study
Shows
Nonunion
Construction
Workers
Rely
on
Public
Hospitals
• All
uncompensated
[health]
care
costs
[in
Clark
county]
attributable
to
[uninsured]
employed
construction
workers
over
the
period
amounted
to
$6.3
million
and
the
total
cost
of
uncompensated
care
to
the
employed
and
their
dependents
was
over
$37
million
for
the
years
1998-‐2000.
– Jeff
Waddoups
of
the
University
of
Nevada
at
Las
Vegas
8
Kansas
repeals
prevailing
wage,
1987
apprenticeship
training
falls
afterward
• After
4
years,
construction
apprenticeship
training
falls
by
38%.
• Minority
apprenticeship
falls
by
54%.
• Open
shop
contractors
accounted
for
only
12%
of
apprentices
being
trained.
• Open
shop
share
of
market
grows
after
repeal,
apprenticeship
training
plummets.
Source:
Peter
Philips,
“Kansas
and
Prevailing
Wage
Legislation”,
University
of
Utah,
February
1998.
Do
Prevailing
Wages
Protect
Local
Workers?
The
Katrina
Suspension:
• On
September
7,
2005,
less
than
two
weeks
after
Hurricane
Katrina,
President
Bush
suspended
the
Davis
Bacon
Act.
• Contractors
were
now
free
to
pay
any
wage
above
the
federal
minimum
of
$5.25
for
workers
to
rebuild
from
the
devastation.
• What
happened?
10
Influx
of
Out-‐of-‐State
Workers
Wages
Drop
• Immigrant
workers
rile
New
Orleans;
Rules
shelved,
crews
labor
for
meager
pay
– Mary
Lou
Pickel,
The
Atlanta
Journal-‐Constitution,
October
19,
2005
Section:
News,
p.
1A.
• New
Orleans
rebuilds
as
tensions
rise;
Influx
of
Latino
workers
has
local
businesses
and
contractors
feeling
left
out,
– Kelly
Brewington,
The
Baltimore
Sun,
October
14,
2005
Section:
Telegraph,
p.
1A;
• Nuevo
Orleans?
An
influx
of
Hispanic
workers
in
the
wake
of
Hurricane
Katrina
has
some
officials
wondering
why
locals
aren’t
on
the
front
line
of
recovery,
– James
Varney,
Times-‐Picayune,
October
18,
2005
,
New
Orleans,
Section:
National,
p.
1;
11
Times
-‐Picayune
Editorialize
Against
D-‐B
Suspension
• [W]e
are
already
moving
quickly
and
boldly
in
the
wrong
direction….[Y]ou
can
hardly
entice
[our
citizens]
back
if
you’re
only
willing
to
pay
poverty
wages.
But
in
the
wake
of
the
disaster,
President
Bush
suspended
the
Davis-‐Bacon
Act….In
essence,
there’s
no
ceiling
preventing
sky-‐high
profits
for
these
[out-‐of-‐state]
contractors
and
not
much
of
a
floor
to
ensure
that
wages
to
workers
are
not
abysmally
low.
There
is
an
intelligent
way
to
rebuild
our
city.
This,
however,
isn’t
it.”
– New
Orleans
Times-‐Picayune
editorial
under
the
headline—“Rebuilding
effort
should
be
localized”:
• Lolis
Eric
Elie,
Times
-‐Picayune,
New
Orleans,
Section:
Metro,
p.
B1
• On
October
26,
2005,
after
pressure
from
both
Democrats
and
Republicans,
Bush
rescinded
his
emergency
order
and
restored
the
prevailing
wage
requirement.
12
A
Natural
Experiment
•
•
•
•
1996
Kentucky
applied
PWs
to
schools
1997
Ohio
eliminated
PWs
on
schools
1994
Michigan
suspended
PWs
on
schools
1997
Michigan
re-‐implemented
PWs
on
schools
Kentucky
No Law
Ohio
Law
Michigan
Law
1991.0
1993.5
Law
No Law
No Law
Law
1996.0
1998.5
2001.0
Natural
Experiment
of
the
Effects
of
Prevailing
Wages
on
Costs
13
No
Meaningful
or
Statistically
Significant
Difference
in
Costs
Looking
at
all
391
schools—MI,
OH,
KY
a
1
2
3 No Law
4 Law
5 t-test
Statistically
Significant
6 Difference?
b
Mean
$96
$98
-0.76
New Public Schools
Real (Inflation Adjusted) Square Foot Cost
c
d
e
f
g
Rural Schools
Urban Schools
Standard Deviation Number Mean Standard Deviation Number
$26
161 $114
$36
40
$24
104 $114
$34
86
0.05
No
No
14
Simply Tracking Kentucky & Ohio
Finds No Cost Savings
Median Cost per Square Foot of New Elementary Schools
110
Ohio Eliminates Law
Kentucky Adds Law
Cost per Sq Foot
83
Kentucky
Ohio
55
Period II:
Kentucky Has Law
Period I:
Ohio Has Law
28
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
“Show me the money!”
Kentucky implemented; Ohio repealed
!15
Results Confirmed in Nation-Wide Study
• Looking at over 4000 new schools built in all
states over the same period
– No practical or statistically significant cost savings
associated with prevailing wage law repeals
– Considerable savings found when schools built during
construction downturns
– Breaking ground in winter raised costs
!
!
• Hamid Azari-Rad, Peter Philips, and Mark Prus, “Making Hay
When It Rains: The Effect Prevailing Wage Regulations, Scale
Economies, Seasonal, Cyclical And Local Business Patterns
Have On School Construction Costs,” Journal of Education
Finance, 27 (SPRING 2002). 997-1012 .
!16
Again
NO
statistically
Significant
Difference
in
Square
Ft.
Costs
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Law
No Law
Elementary
Middle School
IA
High School
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
17
Prevailing
Wage
Laws
&
Construction
Productivity
More
skilled
workers
are
safer,
work
more
efficiently
and
deliver
a
better
producty
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
18
Old
Capitol
in
Iowa
City
awarded
to
out-‐of-‐state
firm
• August,
2001,
Enviro
Safe
Air
from
South
Dakota
(a
non-‐prevailing
wage
law
state),
as
the
low
bidder
at
$105,876
began
work
on
asbestos
removal
19
No
background
check
had
been
done
on
Enviro
Safe
Air
•
•
A
background
check
would
have
revealed
that
Enviro
Safe
Air
had
received
11
state
code
violations
for
the
way
it
removed
asbestos
in
the
previous
ten
years
having
paid
$10,000
in
fines.
In
May,
prior
to
receiving
the
Old
Cap
contract,
Enviro
Safe
Air
had
settled
a
lawsuit
out-‐of-‐court
over
asbestos
removal
violations.
– Associated
Press,
State
and
Local
Wire,
“Repairs
to
Old
Capitol
escalate
to
more
than
$5
million,”
November
30,
2001.
20
Falling
Behind,
Orders
Workers
to
Remove
Paint
&
Asbestos
with
Heat
Guns
&
Torches
• Fritz
Miller
of
Renaissance
Restoration
of
Illinois
(a
prevailing
wage
law
state)
wrote
an
email
to
Al
Bawden,
a
project
manager:
• “I
have
personally
witnessed
Enviro
Safe
personnel
using
open
flame
torches
to
remove
paint
on
the
cupola.
This
is
an
unsafe
method
of
removal,
and
we
have
great
worry
that
a
catastrophic
fire
will
result
from
this
practice.”
– Associated
Press,
State
and
Local
Wire,
“Ill-‐fated
Old
Capitol
in
Iowa
City
was
plagued
with
problems
from
the
beginning,
a
review
of
documents
related
to
the
project
shows,”
January
20,
2002.
21
$100k
Job
Costs
$5
Million
•
Drew
Ives
director
of
the
University
of
Iowa
Facilities
Services:
"The
workers
probably
had
a
lot
of
pressure
from
the
home
office
to
pull
off
the
job
because
it
was
costing
them
to
have
people
there."
•
•
Indeed,
OSHA
alleged
that
Enviro
Safe
Air
instructed
workers
to
use
heat
to
remove
material
containing
asbestos.
This
is
not
only
a
fire
hazard.
•
•
Associated
Press,
State
and
Local
Wire,
“Ill-‐fated
Old
Capitol
in
Iowa
City
was
plagued
with
problems
from
the
beginning,
a
review
of
documents
related
to
the
project
shows,”
January
20,
2002.
Associated
Press,
State
and
Local
Wire,
“Asbestos
removal
company
faces
more
citations,”
February
28,
2002.
“at
their
own
admission
(has)
no
experience
removing
paint
coatings
and
no
experience
working
on
historic
structures.”
–
Terry
Cole,
president
of
Renaissance
Restoration
•
Associated
Press,
State
and
Local
Wire,
“Repairs
to
Old
Capitol
escalate
to
more
than
$5
million,”
November
30,
2001.
22
Labor
Brokers
rent
low-‐wage
workers
• “Raiteros”
drive
groups
of
low-‐wage
workers
for
a
fee
• Mostly
illegal
immigrant
• Brokers
subcontracted
by
temp
agencies
contracted
to
company.
Employees
misclassified
as
independent
contractors
“Major
American
Companies
Benefit
From
Undocumented
Workers”
-‐
ProPublica/
Marketplace,
April
2013
23
Labor brokers cut costs, corners:
Fast-growing firms exploit immigrants to feed
construction industry
Nobles, who initially defended his $6 million a year company, said he
is rethinking many of his practices as the result of inquiries by The
Post and conversations with his lawyers. But, he said, in an industry
that depends on undocumented immigrants for much of its labor,
abuses will continue because they are profitable.
“You don’t have to worry about workman’s comp payments with
Mexicans because they are afraid to go to the hospital. They’re not
going to file a big claim and sue you like the Americans are. That’s
what this boils down to,” Nobles said. “We have these people
intimidated.”
Labor brokers cut costs, corners: Fast-growing firms exploit immigrants to feed construction industry, Denver Post, February 16, 2003
Investigators
report
growing
trends
undermining
a
quality
workforce
“Brokers
often
can
evade
scrutiny
on
big
construction
sites,
where
a
builder
typically
has
numerous
subcontractors,
each
of
whom
may
—
unbeknownst
to
the
contractor
—
farm
out
parts
of
a
job
to
still
other
subcontractors.
That
structure
naturally
pushes
down
—
and
can
intentionally
be
used
to
obscure
—
responsibility
for
wages,
taxes
and
liability.”
“Home-‐Building
Boom
Relies
on
Illegal
Workers”
–
Seattle
Times,
September
17,
2006
“Companies
that
provide
mostly
illegal
immigrant
laborers
to
commercial
building
sites
nationwide
are
thriving
even
as
they
flout
the
country's
most
basic
labor
laws....
In
a
growing
number
of
states,
the
companies
dominate
building
specialties
such
as
drywall
installation,
one
of
the
dirtiest
jobs
in
commercial
construction.”
“Labor
Brokers
Cut
Costs,
Corners”
-‐
Denver
Post,
February
16,
2003
25
Prevailing
Wage
Laws
Stop
Tax
Avoidance
Contractor
Strategies
•
Independent Contractors as a Percent
of Employees in Construction
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
46%
46%
41%
OMAHA
(AP)
-‐-‐
Miguel
is
paid
by
the
hour.
He
is
told
when
to
start
and
finish
his
workday,
when
to
take
breaks
and
what
to
do
on
his
shift.
He
didn't
bid
for
the
job
of
hanging
drywall,
and
he
doesn't
risk
profit
or
loss.
He
wears
a
red
hard
hat
bearing
the
"E
&
K"
insignia
of
an
Omaha
contractor,
Eliason
&
Knuth
Drywall
Co.
He
cashes
a
paycheck
cut
by
a
second
company,
an
Atlanta-‐based
labor
broker
called
Eagle
Managed
Subcontractors.
By
all
appearances,
Miguel
is
somebody's
employee.
Yet
before
he
could
work
on
the
new
Omaha
convention
center,
Miguel,
as
we're
calling
him,
had
to
sign
a
contract
declaring
himself
an
independent
subcontractor.
–
Iowa
18 Other No-Law States
Prevailing Wage Law
States
5%
of
Iowa’s
construction
labor
force
would
have
payroll
taxes
paid
on
them
with
prevailing
wage
regulations
Steve
Jordon,
Cindy
Gonzalez,
“When
a
worker
is
not
an
employee
When
illegal
immigrants
are
classified
as
subcontractors,
taxes
tend
to
disappear.
Who's
the
boss?”
Omaha
World
Herald
(Nebraska),
•
April
27,
2003
NEWS;
p.
1A.
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
26
• Contractors
get
pushed
out
of
the
market
• no
government
oversight
once
CW
is
eliminated
• Increase
in
cash
pay
and
1099
abuse
• Legitimate
NU
contractors
get
hurt
too
27
Health
Insurance
Shifts
costs
off
the
taxpayer
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
28
The
distribution
of
health
insurance
among
union
and
nonunion
construction
workers
Figure5. Union/nonunion & Health Insrance in the Construction Industry
50
45
40
percentage
35
30
nonunion
union
25
20
15
10
5
0
No HI
Private purchase
spouse only
none
part
all
categories
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
29
The
Next
Step
is
to
Act
• Advocate
– Prevent
opponents
from
pushing
further
– Stop
piecemeal
repeal
!
• Contact
your
elected
officials
– let
them
know
you
support
a
common
construction
wage
for
the
sake
of
the
industry
– Important
to
maintain
a
quality
workforce
!
• Oppose
incremental
weakening,
like
raising
the
threshold
where
common
construction
wage
kicks
in
– Already
raised
twice
in
past
two
years
– $150,000
-‐-‐>
$250,000
-‐-‐>
$350,000
Questions?
Wage
And
Applications
to
Indiana’s
Common
Construction
Wage
Prevailing
Wage
Laws
Among
Oldest
Labor
Market
Regulations
• 1868
8-‐Hour
Day
Law
prevailing
wage
provision
• 1891
Kansas
prevailing
wage
law
on
public
works
• 1931
Davis
Bacon
Act
– Senator
John
Davis
(Republican—PA)
– Rep.
Robert
Bacon
(Republican—NY)
– President
Herbert
Hoover
(Republican
IA)
• 1935
Indiana
prevailing
wage
law
(now
Common
Construction
Law)
– Public
jobs
now
>$350,000
total
construction
cost
2
Workers
Benefit
from
Prevailing
Wages
Higher
wages
Personal
and
family
health
insurance
Pension
coverage
Workers
comp
&
unemployment
insurance
coverage
3
As
Wages
Rise,
Contractors
Substitute
Capital
for
Labor
Source:
US
Census
of
Construction,
2002
$150,000
$140,000
Value added per construction worker
Rented machinery per worker
$4,000
$3,000
$2,000
R Sq Linear = 0.193
$1,000
$130,000
$120,000
$110,000
$100,000
$90,000
R Sq Linear = 0.261
$80,000
$25,000.00
$30,000.00
$35,000.00
$40,000.00
$45,000.00
Average construction worker income
Higher
wages
lead
to
more
machinery
per
worker
in
construction
$1,000
$2,000
$3,000
$4,000
Rented machinery per worker
More
machinery
per
worker
leads
to
higher
value
added
per
worker
4
High-‐wage,
capital
intensive
construction
raises
labor
productivity
Shovels
vs.
Backhoe
Wheel-‐
barrow
vs.
Cement
truck
5
High
Wage
Industries
Need
High
Wage
Construction
University
of
Iowa
Research
Park
BioVentures
Center
World
Class
Competitive
Industries
Require
World
Class
Infrastructure
•
•
•
Local
construction
capabilities
enable
or
constrain
the
industries
which
rely
on
modern
infrastructure
US
Biotechnology
Clusters
Prevailing
wage
law
states:
–
•
Seattle,
USA
San
Francisco,
USA
Los
Angeles,
USA
San
Diego,
USA
Minneapolis/St.
Paul/Rochester
USA
Austin,
USA
Boston,
USA
New
York/New
Jersey,
USA
Philadelphia,
USA
Baltimore/Washington,
DC,
USA
No
law
states
–
Research
Triangle
NC,
USA
•
http://www.mbbnet.umn.edu/scmap/
biotechmap.html
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
6
Taxpayers
Benefit
from
PW
Benefits
• Construction
workers
are
5-‐7%
of
labor
force
– When
construction
workers
get
health
insurance,
less
pressure
on
public
health
system
– When
construction
workers
get
pensions,
less
pressure
on
public
care
for
the
elderly
– When
contractors
pay
into
workers
comp
&
unemployment
system,
funds
remain
viable
7
Las
Vegas
Study
Shows
Nonunion
Construction
Workers
Rely
on
Public
Hospitals
• All
uncompensated
[health]
care
costs
[in
Clark
county]
attributable
to
[uninsured]
employed
construction
workers
over
the
period
amounted
to
$6.3
million
and
the
total
cost
of
uncompensated
care
to
the
employed
and
their
dependents
was
over
$37
million
for
the
years
1998-‐2000.
– Jeff
Waddoups
of
the
University
of
Nevada
at
Las
Vegas
8
Kansas
repeals
prevailing
wage,
1987
apprenticeship
training
falls
afterward
• After
4
years,
construction
apprenticeship
training
falls
by
38%.
• Minority
apprenticeship
falls
by
54%.
• Open
shop
contractors
accounted
for
only
12%
of
apprentices
being
trained.
• Open
shop
share
of
market
grows
after
repeal,
apprenticeship
training
plummets.
Source:
Peter
Philips,
“Kansas
and
Prevailing
Wage
Legislation”,
University
of
Utah,
February
1998.
Do
Prevailing
Wages
Protect
Local
Workers?
The
Katrina
Suspension:
• On
September
7,
2005,
less
than
two
weeks
after
Hurricane
Katrina,
President
Bush
suspended
the
Davis
Bacon
Act.
• Contractors
were
now
free
to
pay
any
wage
above
the
federal
minimum
of
$5.25
for
workers
to
rebuild
from
the
devastation.
• What
happened?
10
Influx
of
Out-‐of-‐State
Workers
Wages
Drop
• Immigrant
workers
rile
New
Orleans;
Rules
shelved,
crews
labor
for
meager
pay
– Mary
Lou
Pickel,
The
Atlanta
Journal-‐Constitution,
October
19,
2005
Section:
News,
p.
1A.
• New
Orleans
rebuilds
as
tensions
rise;
Influx
of
Latino
workers
has
local
businesses
and
contractors
feeling
left
out,
– Kelly
Brewington,
The
Baltimore
Sun,
October
14,
2005
Section:
Telegraph,
p.
1A;
• Nuevo
Orleans?
An
influx
of
Hispanic
workers
in
the
wake
of
Hurricane
Katrina
has
some
officials
wondering
why
locals
aren’t
on
the
front
line
of
recovery,
– James
Varney,
Times-‐Picayune,
October
18,
2005
,
New
Orleans,
Section:
National,
p.
1;
11
Times
-‐Picayune
Editorialize
Against
D-‐B
Suspension
• [W]e
are
already
moving
quickly
and
boldly
in
the
wrong
direction….[Y]ou
can
hardly
entice
[our
citizens]
back
if
you’re
only
willing
to
pay
poverty
wages.
But
in
the
wake
of
the
disaster,
President
Bush
suspended
the
Davis-‐Bacon
Act….In
essence,
there’s
no
ceiling
preventing
sky-‐high
profits
for
these
[out-‐of-‐state]
contractors
and
not
much
of
a
floor
to
ensure
that
wages
to
workers
are
not
abysmally
low.
There
is
an
intelligent
way
to
rebuild
our
city.
This,
however,
isn’t
it.”
– New
Orleans
Times-‐Picayune
editorial
under
the
headline—“Rebuilding
effort
should
be
localized”:
• Lolis
Eric
Elie,
Times
-‐Picayune,
New
Orleans,
Section:
Metro,
p.
B1
• On
October
26,
2005,
after
pressure
from
both
Democrats
and
Republicans,
Bush
rescinded
his
emergency
order
and
restored
the
prevailing
wage
requirement.
12
A
Natural
Experiment
•
•
•
•
1996
Kentucky
applied
PWs
to
schools
1997
Ohio
eliminated
PWs
on
schools
1994
Michigan
suspended
PWs
on
schools
1997
Michigan
re-‐implemented
PWs
on
schools
Kentucky
No Law
Ohio
Law
Michigan
Law
1991.0
1993.5
Law
No Law
No Law
Law
1996.0
1998.5
2001.0
Natural
Experiment
of
the
Effects
of
Prevailing
Wages
on
Costs
13
No
Meaningful
or
Statistically
Significant
Difference
in
Costs
Looking
at
all
391
schools—MI,
OH,
KY
a
1
2
3 No Law
4 Law
5 t-test
Statistically
Significant
6 Difference?
b
Mean
$96
$98
-0.76
New Public Schools
Real (Inflation Adjusted) Square Foot Cost
c
d
e
f
g
Rural Schools
Urban Schools
Standard Deviation Number Mean Standard Deviation Number
$26
161 $114
$36
40
$24
104 $114
$34
86
0.05
No
No
14
Simply Tracking Kentucky & Ohio
Finds No Cost Savings
Median Cost per Square Foot of New Elementary Schools
110
Ohio Eliminates Law
Kentucky Adds Law
Cost per Sq Foot
83
Kentucky
Ohio
55
Period II:
Kentucky Has Law
Period I:
Ohio Has Law
28
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
“Show me the money!”
Kentucky implemented; Ohio repealed
!15
Results Confirmed in Nation-Wide Study
• Looking at over 4000 new schools built in all
states over the same period
– No practical or statistically significant cost savings
associated with prevailing wage law repeals
– Considerable savings found when schools built during
construction downturns
– Breaking ground in winter raised costs
!
!
• Hamid Azari-Rad, Peter Philips, and Mark Prus, “Making Hay
When It Rains: The Effect Prevailing Wage Regulations, Scale
Economies, Seasonal, Cyclical And Local Business Patterns
Have On School Construction Costs,” Journal of Education
Finance, 27 (SPRING 2002). 997-1012 .
!16
Again
NO
statistically
Significant
Difference
in
Square
Ft.
Costs
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Law
No Law
Elementary
Middle School
IA
High School
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
17
Prevailing
Wage
Laws
&
Construction
Productivity
More
skilled
workers
are
safer,
work
more
efficiently
and
deliver
a
better
producty
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
18
Old
Capitol
in
Iowa
City
awarded
to
out-‐of-‐state
firm
• August,
2001,
Enviro
Safe
Air
from
South
Dakota
(a
non-‐prevailing
wage
law
state),
as
the
low
bidder
at
$105,876
began
work
on
asbestos
removal
19
No
background
check
had
been
done
on
Enviro
Safe
Air
•
•
A
background
check
would
have
revealed
that
Enviro
Safe
Air
had
received
11
state
code
violations
for
the
way
it
removed
asbestos
in
the
previous
ten
years
having
paid
$10,000
in
fines.
In
May,
prior
to
receiving
the
Old
Cap
contract,
Enviro
Safe
Air
had
settled
a
lawsuit
out-‐of-‐court
over
asbestos
removal
violations.
– Associated
Press,
State
and
Local
Wire,
“Repairs
to
Old
Capitol
escalate
to
more
than
$5
million,”
November
30,
2001.
20
Falling
Behind,
Orders
Workers
to
Remove
Paint
&
Asbestos
with
Heat
Guns
&
Torches
• Fritz
Miller
of
Renaissance
Restoration
of
Illinois
(a
prevailing
wage
law
state)
wrote
an
to
Al
Bawden,
a
project
manager:
• “I
have
personally
witnessed
Enviro
Safe
personnel
using
open
flame
torches
to
remove
paint
on
the
cupola.
This
is
an
unsafe
method
of
removal,
and
we
have
great
worry
that
a
catastrophic
fire
will
result
from
this
practice.”
– Associated
Press,
State
and
Local
Wire,
“Ill-‐fated
Old
Capitol
in
Iowa
City
was
plagued
with
problems
from
the
beginning,
a
review
of
documents
related
to
the
project
shows,”
January
20,
2002.
21
$100k
Job
Costs
$5
Million
•
Drew
Ives
director
of
the
University
of
Iowa
Facilities
Services:
"The
workers
probably
had
a
lot
of
pressure
from
the
home
office
to
pull
off
the
job
because
it
was
costing
them
to
have
people
there."
•
•
Indeed,
OSHA
alleged
that
Enviro
Safe
Air
instructed
workers
to
use
heat
to
remove
material
containing
asbestos.
This
is
not
only
a
fire
hazard.
•
•
Associated
Press,
State
and
Local
Wire,
“Ill-‐fated
Old
Capitol
in
Iowa
City
was
plagued
with
problems
from
the
beginning,
a
review
of
documents
related
to
the
project
shows,”
January
20,
2002.
Associated
Press,
State
and
Local
Wire,
“Asbestos
removal
company
faces
more
citations,”
February
28,
2002.
“at
their
own
admission
(has)
no
experience
removing
paint
coatings
and
no
experience
working
on
historic
structures.”
–
Terry
Cole,
president
of
Renaissance
Restoration
•
Associated
Press,
State
and
Local
Wire,
“Repairs
to
Old
Capitol
escalate
to
more
than
$5
million,”
November
30,
2001.
22
Labor
Brokers
rent
low-‐wage
workers
• “Raiteros”
drive
groups
of
low-‐wage
workers
for
a
fee
• Mostly
illegal
immigrant
• Brokers
subcontracted
by
temp
agencies
contracted
to
company.
Employees
misclassified
as
independent
contractors
“Major
American
Companies
Benefit
From
Undocumented
Workers”
-‐
ProPublica/
Marketplace,
April
2013
23
Labor brokers cut costs, corners:
Fast-growing firms exploit immigrants to feed
construction industry
Nobles, who initially defended his $6 million a year company, said he
is rethinking many of his practices as the result of inquiries by The
Post and conversations with his lawyers. But, he said, in an industry
that depends on undocumented immigrants for much of its labor,
abuses will continue because they are profitable.
“You don’t have to worry about workman’s comp payments with
Mexicans because they are afraid to go to the hospital. They’re not
going to file a big claim and sue you like the Americans are. That’s
what this boils down to,” Nobles said. “We have these people
intimidated.”
Labor brokers cut costs, corners: Fast-growing firms exploit immigrants to feed construction industry, Denver Post, February 16, 2003
Investigators
report
growing
trends
undermining
a
quality
workforce
“Brokers
often
can
evade
scrutiny
on
big
construction
sites,
where
a
builder
typically
has
numerous
subcontractors,
each
of
whom
may
—
unbeknownst
to
the
contractor
—
farm
out
parts
of
a
job
to
still
other
subcontractors.
That
structure
naturally
pushes
down
—
and
can
intentionally
be
used
to
obscure
—
responsibility
for
wages,
taxes
and
liability.”
“Home-‐Building
Boom
Relies
on
Illegal
Workers”
–
Seattle
Times,
September
17,
2006
“Companies
that
provide
mostly
illegal
immigrant
laborers
to
commercial
building
sites
nationwide
are
thriving
even
as
they
flout
the
country's
most
basic
labor
laws....
In
a
growing
number
of
states,
the
companies
dominate
building
specialties
such
as
drywall
installation,
one
of
the
dirtiest
jobs
in
commercial
construction.”
“Labor
Brokers
Cut
Costs,
Corners”
-‐
Denver
Post,
February
16,
2003
25
Prevailing
Wage
Laws
Stop
Tax
Avoidance
Contractor
Strategies
•
Independent Contractors as a Percent
of Employees in Construction
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
46%
46%
41%
OMAHA
(AP)
-‐-‐
Miguel
is
paid
by
the
hour.
He
is
told
when
to
start
and
finish
his
workday,
when
to
take
breaks
and
what
to
do
on
his
shift.
He
didn't
bid
for
the
job
of
hanging
drywall,
and
he
doesn't
risk
profit
or
loss.
He
wears
a
red
hard
hat
bearing
the
"E
&
K"
insignia
of
an
Omaha
contractor,
Eliason
&
Knuth
Drywall
Co.
He
cashes
a
paycheck
cut
by
a
second
company,
an
Atlanta-‐based
labor
broker
called
Eagle
Managed
Subcontractors.
By
all
appearances,
Miguel
is
somebody's
employee.
Yet
before
he
could
work
on
the
new
Omaha
convention
center,
Miguel,
as
we're
calling
him,
had
to
sign
a
contract
declaring
himself
an
independent
subcontractor.
–
Iowa
18 Other No-Law States
Prevailing Wage Law
States
5%
of
Iowa’s
construction
labor
force
would
have
payroll
taxes
paid
on
them
with
prevailing
wage
regulations
Steve
Jordon,
Cindy
Gonzalez,
“When
a
worker
is
not
an
employee
When
illegal
immigrants
are
classified
as
subcontractors,
taxes
tend
to
disappear.
Who's
the
boss?”
Omaha
World
Herald
(Nebraska),
•
April
27,
2003
NEWS;
p.
1A.
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
26
• Contractors
get
pushed
out
of
the
market
• no
government
oversight
once
CW
is
eliminated
• Increase
in
cash
pay
and
1099
abuse
• Legitimate
NU
contractors
get
hurt
too
27
Health
Insurance
Shifts
costs
off
the
taxpayer
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
28
The
distribution
of
health
insurance
among
union
and
nonunion
construction
workers
Figure5. Union/nonunion & Health Insrance in the Construction Industry
50
45
40
percentage
35
30
nonunion
union
25
20
15
10
5
0
No HI
Private purchase
spouse only
none
part
all
categories
Peter
Philips,
Professor
and
Chair,
Economics
Dept,
Univ.
of
Utah
29
The
Next
Step
is
to
Act
• Advocate
– Prevent
opponents
from
pushing
further
– Stop
piecemeal
repeal
!
• Contact
your
elected
officials
– let
them
know
you
support
a
common
construction
wage
for
the
sake
of
the
industry
– Important
to
maintain
a
quality
workforce
!
• Oppose
incremental
weakening,
like
raising
the
threshold
where
common
construction
wage
kicks
in
– Already
raised
twice
in
past
two
years
– $150,000
-‐-‐>
$250,000
-‐-‐>
$350,000
Questions?
