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STUDY: Prevailing Wages Add 17,500 Jobs, $1.4B of Output to CA Economy

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A new study from Smart Cities Prevail (SCP) found that prevailing wage policies add 17,500 jobs and $1.4 billion in output across California’s economy.  The study, titled “Building the Golden State – The Economic Impacts of California’s Prevailing Wage Policy,” also found that prevailing wage policies facilitate broad improvements to the construction industry as a whole, including substantial reductions in material waste and dramatic increases in both local hiring and overall workforce productivity.  

Colorado State University-Pueblo Economist Dr. Kevin Duncan, a co-author of the study, highlighted new findings in the report saying:

“While past research has already concluded that prevailing wage promotes workforce development, safer job sites, less dependence on public assistance, and has only negligible impacts on project cost, these new findings show the value of these standards both to the construction industry and our economy as a whole.  From creating jobs to increasing efficiency, it is clear that prevailing wage policies provide taxpayers with a far better return on investment than the less beneficial alternative.”

As legislatures in states such as Wisconsin, Indiana, and Nevada are working to repeal their prevailing wage laws, the California legislature is working to protect theirs.  The state passed SB 7 last year, which barred funds from going to charter cities which fail to pay prevailing wages on public works projects.  But SCP is no fool; they understand that a national anti-wage climate can not be taken lightly. What should be a no-brainer — keeping prevailing wages in tact — must constantly be supported with data.

Their report found that the consequences of eliminating the prevailing wage in California would include:

• Gross job losses of 48,500 and net job losses of 17,500
• 3% – 5.5% increase in out-of-state contracting
• State economic output reduced by $1.4 billion
• Real income reduced by $1.5 billion
• More construction professionals living at or near the poverty line
• 12% decline in workforce productivity and 5% increase in materials waste

SCP researcher Alex Lantsberg, a co-author of the report, argues that his findings should apply nationally:

“This study provides important context for the recent changes to California’s prevailing wage laws, but also for the debates that are happening in other states across the country,” Lantsberg said. “The data shows that the decision to weaken or eliminate prevailing wage is a choice that can increase poverty, export more tax dollars out of state, and eliminate thousands of jobs in the process.

“It’s important to note that this study focuses on the benefits of the state prevailing wage policy, but does not analyze the additional positive benefits that come from federal and local policies. For example, the state and federally funded high speed rail project in California is estimated to create 20,000 prevailing wage construction jobs in the first five years of construction, and tens of thousands more in the years that follow.”

The study used IMPLAN software to model the impact of eliminating California’s prevailing wage standards.  IMPLAN is the industry standard for analyzing the effects of government policy choices on the economy.


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