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KY Senate Advances Prevailing Wage Repeal, but Statistics Don’t Support Construction Pay Cuts

Republican State Sen. Schroder (the bill's sponsor) and Sen. Carroll

Republican State Sen. Schroder (the bill’s sponsor) and Sen. Carroll

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In Kentucky, Senate Republicans are moving forward with SB 9, which would exempt all school and university construction projects from the state’s prevailing wage law.  The bill passed through the Senate Standing Committee on Appropriations and Revenue this week by a 10-1 margin. It could see a full Senate vote by Friday. 

Changes to the prevailing wage are a priority for the Kentucky GOP and newly-elected Governor Matt Bevin, but they are far from a sureshot with the Democrat-controlled House standing in the way. As we wrote last week, the Kentucky Legislature is at a crossroads and special elections in March might result in a 50/50 House split if Republicans capture all four up-for-grabs seats.  

The bill would also cover college campuses, including dormitories and university hospitals.  With several big college towns in the Bluegrass State, the negative impact on tradesmen and women would be palpable.

Labor advocates view the GOP’s math as prevailingly fuzzy.  Sen. Wil Schroder, the bill’s sponsor, argued that researchers estimate a 7.9 percent cost savings for K-12 school projects if the bill becomes law.  He also argued that “prevailing wage requirements increased labor costs on a sample of school projects by 51 percent.”

Well, which is it then?

Bill Finn, Director of the Kentucky State Building and Construction Trades Council, argues that the stats used by Schroder look only at wage costs and not total project costs.  Finn quoted statistics from a peer reviewed economic analysis of the state’s 2014 prevailing wage by a professor of economics at the University of Utah.  According to that study:

The study scope encompassed 391 schools in Kentucky, Ohio and Michigan, Finn said, finding no statistical difference in increasing construction.

Finn also said the LRC study didn’t look at total project costs but only wage costs. The wages and benefits workers receive, Finn said, only make up about 20 percent of the project’s costs.
Other findings from the analysis included:

• New tools and technology reduce construction costs
• States that exempted prevailing wage requirements saw no savings in construction costs
• The requirement drives funding for apprenticeship construction training
• An 18 percent higher fatality rate among workers in states that don’t have a prevailing wage requirement

Also testifying against SB 9 was Bill Londrigan, President of the Kentucky AFL-CIO.  Londrigan argues that the prevailing wage is a public policy issue worth preserving:

“One of the factors that we’ve decided through the legislature on several occasions now is to take the wages and benefits of the workers out of competition so they are not used as a lever to ratchet down wages or workers in the pool of construction workers.  The basic issue here is whether or not we are going to allow public dollars that are going to be expended on a public construction projects to be used in a manner that makes it difficult for workers that want to be in the skilled construction trades.”

The University of Utah study also considered the cost of building elementary schools in Kentucky and Ohio during the 1990s, when Kentucky re-instituted the prevailing wage to its schools while Ohio repealed it.  The result? No statistically significant difference in the square foot construction costs between the two states. This means paying workers fairly is not what determines project cost.


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