Oct 10 2018

A July, 2018 study examining Minnesota’s Prevailing Wage law showed that having such requirements on construction projects does not increase total project costs after reviewing 640 bid packages. The study titled An Examination of Minnesota’s Prevailing Wage law – Effects on Costs, Training and Economic Development, involved a wide spectrum of school construction projects that had both prevailing wage requirements and non-wage requirements. The authors were Frank Manzo IV, M.P.P. of the Midwest Economic Policy Institute and Kevin Duncan, Ph.D., BCG Economics, LLC and Professor of Economics, Colorado State University – Pueblo.

Per the Executive Summary, the Minnesota Prevailing Wage Act provides wage requirements for construction workers employed on public projects. The main purpose of the prevailing wage law is to protect local construction standards in the required low-bid environment. Prevailing wage laws create a level playing field for all contractors by ensuring that public expenditures maintain and reflect local area standards for wages and benefits.

Key Findings

  • 72 percent of peer – reviewed studies conducted since 2000 find that prevailing wage laws have
  • no effect on the cost of public construction projects.
  • Labor costs are a low and historically declining share of total project costs – about 23 percent.
  • Four studies since 1999 analyzing 2,183 bids on public projects find that prevailing wage has no effect on bid competition.
  • A new analysis of 640 contractor bids on school construction projects in the Minneapolis-St. Paul metropolitan area finds that winning bids based on the payment of prevailing wages are no more costly than bids that do not require prevailing wages.

Effective Job Skills Advancement Policy

The report also noted that the Minnesota Prevailing Wage Act is an effective job skills advancement policy. Economic research has found that the law helps increase apprenticeship training, boost worker productivity and reduce injury rates. The prevailing wage law has worked to improve opportunities for African- American, Latino and veteran apprentices through jointly funded labor-management training programs. Compared to Indiana, which recently repealed its prevailing wage law, per worker productivity has grown 7.7 percentage points and worker turnover rates have fallen further in Minnesota.

Providing Pathways into the Middle Class

Economic research finds that prevailing wage laws foster middle- class careers that attract talented young workers to the construction trades. The law increases blue-collar construction workers incomes by 5.2 percent, expands health insurance coverage by 5.0 percent and increases the share of construction workers with pension plans by 5.3 percentage points. In addition, the law helps reduce the share of construction workers who receive food stamp assistance by 2.1 percentage points.

Local Contractors and Minnesota’s Economy Benefits

The report finds that when school districts in the Twin Cities area include prevailing wages on projects, local contractors account for 10 percent higher market share – with tax dollars staying in the local economy. By protecting work for in-state contractors and their employees, Minnesota’s Prevailing Wage law creates 7,200 jobs in Minnesota, improves the state economy by $981 million and generates $37 million in state and local tax revenue every year.

Minnesota’s Prevailing Wage Law produces positive impacts on the broader Minnesota economy. By protecting local standards, prevailing wage supports work for local contractors and their employees. The Minnesota Prevailing Wage Act is the best deal for taxpayers.

1. An Examination of Minnesota’s Prevailing Wage Law – Effects on Costs, Training, and Economic Development – July 2018.