PAGE 2 | January 15, 2021 | NORTHWEST LABOR PRESS
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WORKERS RIGHTS
Oregon’s prevailing wage law analyzed
A new study finds the law raises
wages, but not project cost.
By Don McIntosh
Oregon’s prevailing wage law
results in 8% higher wages for
workers on public construction
projects, but doesn’t increase the
cost of the projects, according to
a new study co-authored by
Frank Manzo of the Illinois
Economic Policy Institute and
Lina Stepick of the University
of Oregon Labor Education and
Research Center (LERC). That
might seem counter-intuitive,
until you get to the likely expla-
nations.
First, the labor cost for the
hourly construction workers
covered by the law is a small
share of total project cost—
about 25% in Oregon, according
to the study authors. Materials,
equipment, fuel, rental costs,
management salaries, taxes, li-
censes, etc. make up the other
75%. So even if craft workers
get paid 10% more, that equates
to 2.5% of project cost.
But it doesn’t seem to raise
project cost, Stepick and Mazzo
concluded, because contractors
seem to react by employing
higher skilled and more produc-
tive workers, and accepting a
smaller profit margin.
Prevailing wage laws set the
minimum hourly pay and bene-
fits for workers in each craft
specialty so that bidders don’t
compete for public contracts
based on who can pay the least.
Stepick and Manzo analyzed
more than 1,100 contractor bids
on nearly 300 state highway
projects in Oregon and Idaho.
Idaho doesn’t have a state pre-
vailing wage law, but 79% of its
road projects were federally
funded and thus subject to the
federal prevailing wage law.
That allowed researchers to
compare projects that paid the
prevailing wage to those that
didn’t. They found no difference
in cost per mile. Manzo has
found similar results in his stud-
ies of prevailing wage laws in at
least 10 other states.
The Oregon report also in-
cludes a summary of peer-re-
viewed studies of the effect of
prevailing wage on the cost of
school construction, highway
maintenance, and municipal
building projects. [A peer-re-
viewed study is one that’s ac-
READ THE FULL STUDY
nwlaborpress.org/pw-study
cepted for publication in an ac-
ademic journal after peers in the
same specialty review and vali-
date the research.] Out of 18
peer-reviewed studies of pre-
vailing wage since 2000, 15
found no impact on cost, while
three found the laws increased
project costs 2%, 8% and 13%.
Stepick and Mazzo’s study
also splashes cold water on
other arguments that opponents
of prevailing wage sometimes
make, like that the law’s com-
plexity results in fewer bidders,
less competition, and therefore
increased cost. Comparing the
Oregon and Idaho contracts,
they found there were actually
19% more bidders on prevailing
wage projects.
Prevailing wage is also
strongly correlated with appren-
ticeship training: Apprenticeship
enrollments are 6% to 8%
higher in states with prevailing
wage, and states that repeal the
prevailing wage see significant
drops in apprenticeship.
Twenty-eight states have pre-
vailing wage laws. Oregon’s has
been in effect since 1959, but
came under attack by Republi-
can leaders in the mid-1990s.
When opponents put a repeal of
the prevailing wage on the ballot
in 1994, voters rejected the
measure by 62%.
“Prevailing wage levels the
playing field, boosts investment
in apprenticeship training pro-
grams, improves productivity
and worksite safety, and stabi-
lizes construction costs,”
Stepick and Mazzo write. “Ore-
gon’s Prevailing Wage Rate
Law levels the playing field for
contractors by taking labor costs
out of the equation, incentiviz-
ing them to compete based on
core competencies and efficien-
cies in construction rather than
on undermining middle-class
compensation standards.”
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