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Tom Crouser: Prevailing wage study not decisive (Opinion)

If a union wanted to convince West Virginians we should reinstate the prevailing wage law, they might commission a study, conclude that it didn’t have “much” of an impact, and argue, “So, why not reinstate it?” Further, they may reason, since reinstatement won’t be done by our Republican-controlled Legislature, the Democrats should get behind it as a campaign issue. Well, I say, if we want to study prevailing wage, let’s study it. But, let’s not adopt a special interest report as gospel. Here are details.

The report, “The Impact of Repealing West Virginia’s Prevailing Wage Law,” was paid for by Affiliated Construction Trades, a division of the West Virginia State Building & Construction Trades Council AFL-CIO. Their 20,000-construction worker members previously received prevailing wage pay when working on certain state-funded projects.

Our state prevailing wage law was repealed in 2016. It had been in place since the 1930s and provided a minimum wage and benefit for specific construction workers on state-funded projects. The federal Davis-Bacon Act provides a similar guarantee for federally funded construction projects and remains in effect.

Opponents said the law inflated state construction costs. And that’s the reason for the union report. Did it? Not unexpectedly, the union study found that the repeal had negative effects for West Virginia’s construction workers and contractors without delivering meaningful cost savings to taxpayers.

Meaningful? Note that a 1 percent reduction in the planned $68 million Herbert Hoover High is $680,000.

However, look closer.

The union contracted with the Midwest Economic Policy Institute for the study, and that’s my issue.

Among the reports the institute has issued is, “An Examination of Minnesota’s Prevailing Wage Law (2018).” Among the findings are that the act keeps construction costs stable (note, not low); is an effective job skills advancement policy; provides pathways to the middle class and boosts the economy.

Then there was, “The Economic, Fiscal, and Social Effects of Ohio’s Prevailing Wage Law (2017).” This report, funded by the Affiliated Construction Trades of Ohio, cites, “... weakening or repealing Ohio’s prevailing wage standard is unlikely to save taxpayer dollars. In fact, a weaker policy would increase taxpayer burdens as construction worker incomes decrease and their reliance on public assistance increases.”

Their report submitted to the Kentucky State Building and Construction Trades Council, titled, “The Economic, Fiscal, and Social Effects of Kentucky’s Prevailing Wage Law (2016)” states: “Weakening or repealing Kentucky’s prevailing wage law would be associated with a $248 million net leakage of construction business out of Kentucky’s building industry. This loss of construction business and spending would ripple throughout Kentucky’s economy and reduce economic activity by approximately $400 million. The corresponding total employment loss would be 2,900 jobs ... .”

And there’s the study on, “Prevailing Wage Repeal Cannot Result in ‘44 Percent Savings.’ ” And, there’s more. But one can conclude by observation that the Midwest Economic Policy Institute produces studies supportive of prevailing wage.

But they don’t publish all studies on prevailing wage. The Center for Business and Economic Research of the University of Kentucky published a 2018 study titled, “An Evaluation of How Repealing West Virginia’s Prevailing Wage Law Affected the Cost of Public Construction.”

That study found construction costs decreased 7.3 percent on a square-footage basis after repeal. Yes, the union study takes issue with this Kentucky study in several areas. But that doesn’t mean the union study is right. Nor does it mean the University of Kentucky study is right, either.

It does mean that, if the state of West Virginia needs to study prevailing wage, it should do so without relying on special interests.

By the way, the oft-quoted “five schools for the price of three” will never happen. Wages run 23 percent of total costs, according to the union report. Eliminate all wages, which is impossible, and the costs are still 67 percent. Five times 67 percent is 335 percent, or more than the costs of three schools without wage elimination (300 percent).

Tom Crouser is a business consultant living in Mink Shoals and a Gazette-Mail contributing columnist. Reach him at tom@crouser.com

or follow @TomCrouser on Twitter.

Funerals for Wednesday, June 26, 2019

Berdine, Robert - 2 p.m., Stump Funeral Home & Cremation Inc., Arnoldsburg.

Bonsall, Buddy - 11 a.m., Good Shepherd Mortuary, South Charleston.

Holstein, Gary - 2 p.m., Handley Funeral Home, Danville.

Keener, John - 8 p.m., Roach Funeral Home, Gassaway.

Miller, Edward - 1 p.m., Taylor-Vandale Funeral Home, Spencer.

Wright, Virginia - 11 a.m., Nitro Church of God, Nitro.