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MEPI: Prevailing Wage Cost Savings Claims Mean WI GOP “Expects People to Work For Free”



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In Wisconsin, opponents of the prevailing wage have suggested that a full repeal could result in savings of 44%. But a new report from the Midwest Economic Policy Institute (MEPI) – “Prevailing Wage Repeal Cannot Result in ’44 Percent Savings’” – challenges that assertion.

MEPI takes particular issue with a 2015 Wisconsin Taxpayer Alliance study, the original source of the 44% figure which was used by Wisconsin Republicans to partially repeal Wisconsin’s prevailing wage (that kicks in January 1, 2017:

In spite of the conclusions of economic experts and independent fiscal analysts, the Wisconsin State Legislature repealed prevailing wage for local governmental units beginning on January 1, 2017 (DWD, 2015). The primary study cited in support of repeal was a 2015 report by the Wisconsin Taxpayer Alliance, which claimed that prevailing wage “forces taxpayers” to pay 44 percent more than the market rate based on hypothetical comparisons.

State Senator Duey Stroebel…said in an interview that Wisconsin “need[s] to look at the repeal of the state prevailing wage. … Going back to the prevailing wage debate of last year, the Bureau of Labor Statistics, there is on average 44 percent savings.”

These claims are inaccurate according to “the actual economic data.” MEPI insists that anyone who arrives at this 44% figure is, to put it mildly, bad at math:

▪ Anyone claiming that prevailing wage repeal would result in significant construction cost savings (20 percent or more) either does not understand the construction industry, is bad at math, or expects people to work for free.
▪ The 2015 Wisconsin Taxpayer Alliance study claiming that prevailing wage inflates costs by 44 percent is an apples-to-oranges hypothetical.
▪ The data used in the 2015 study has numerous limitations and flaws: it excludes benefits and training contributions, it does not account for skill level or overtime, it over-represents residential construction, it uses information that is up to three years old, and it attributes construction work to contractor business addresses rather than the physical location of the project.

MEPI cites a case study involving counties on the Iowa/Wisconsin border, further demonstrating the effects of prevailing wage on costs and earnings:

▪ A case study of Wisconsin counties near the border of Iowa, a state without prevailing wage, finds that road construction workers earn 8.1 percent more on average than their Iowa counterparts using actual economic data.
▪ Multiplying the 8.1-percent wage difference by labor’s share of total costs for highway, street, and bridge construction contractors (21 percent) reveals that the maximum “cost savings” that could occur without prevailing wage are 1.7 percent– an estimate which fails to consider changes in worker quality, worker productivity, and job turnover that would offset these cost savings.

Maybe they’re using special interest calculators. See for yourself, via MEPI.


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