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Sep
2015
17

Former Assoc. Builders & Contractors Lobbyist Op-Ed Dismantled by Actual Economist

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Responding to an op-ed by former Associated Builders and Contractors officer George Hawkins that cast shadows on a Smart Cities Prevail wage study, economist Kevin Duncan dismantled the anti-union lobby’s talking points on the San Diego Source.

After explaining the process by which he conducts his peer reviewed studies, Duncan conceded only one of Hawkins’ assertions: “too often, the debate over the merits of prevailing-wage policies has devolved into ideologically based arguments and conspiracy theories.”

Ain’t that the truth.

Specifically, Duncan takes issue with the idea that cheaper labor results in cheaper projects:

Ultimately, the notion of cheaper labor equals cheaper projects, which Mr. Hawkins notes in his piece, is steeped in a myth. Labor just isn’t that much of a total project’s cost. In fact, it pales in comparison to fuels, materials and purchased services — all of which cost more in non-prevailing-wage states.

As they relate to overall project costs, the spending differences between the two different types of states offset each other, which is what makes prevailing wage cost-neutral as a policy matter.

Duncan uses the charter city of Carlsbad as an example. In this instance, prevailing wage repeal failed to produce positive results.  Several California cities have switched to charter status in order to avoid paying the prevailing wage, a move that has often lead to disastrous results. According to Duncan:

These facts help explain why, to use a local example, the Charter City of Carlsbad recently noted that “savings were hard to ascertain,” when asked about the financial impact of its decision not to pay prevailing wage on local public works. In the same survey, it also suggested that changing its policy on prevailing wages had resulted in more change orders, costly project delays and other issues.
Ultimately, the new economic impact data — such as prior peer-reviewed data that show higher rates of worksite injuries, poverty and construction worker reliance on public assistance in non-prevailing wage states — is what ultimately tips the scales in favor of prevailing wage as a policy choice.

That’s because higher wages and more local people working translates to more spending across all sectors of the economy — whether at grocery stores, movie theaters, paying the rent, getting your car fixed or buying a life insurance policy. And this directly translates to more jobs — or in the case of non-prevailing wage states or communities, fewer jobs.

Duncan provides further insight and analysis, noting the differences in Wisconsin Governor Scott Walker and Michigan Gov. Rick Snyder who, despite their fellow party members’ desires, have different takes on the prevailing wage:

In Wisconsin and Michigan, where prevailing wage repeals have been under active consideration for much of this year, such analysis is especially important. In Wisconsin, Gov. Scott Walker has already signed a repeal bill that will net job losses of 8,700, export $500 million of construction investments out of state, and reduce overall economic output by $1.2 billion.

In Michigan, where a past experiment with prevailing-wage repeal failed in the 1990s, a new drive to repeal the policy is underway — and would cost Michigan 11,300 jobs, $700 million in local construction investment and $1.7 billion in economic output.

Finally, when it comes to prevailing-wage policy, I’ll agree with Mr. Hawkins that politics play a role — but the difference between a good and bad judgment on this policy is whether politics trump facts.

On this score, there is much to be learned from Michigan and Wisconsin. Michigan’s Republican governor, who deserves credit for turning that state’s ailing economy around, is actively opposing repeal. By contrast, the Wisconsin Republican governor who signed a repeal is running for president.

As of June, Wisconsin ranked 38th in job growth. The only Midwest state performing worse is Iowa.

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