FACT-CHECKING CLAIMS THAT COMMON CONSTRUCTION WAGE REPEAL WOULD HELP INDIANAS ECONOMY

There are significant problems associated with claims by lobbyists and legislators who oppose Indianas Common
Construction Wage (CCW).
1. Indianas CCW has been weakened in recent years, with the threshold for coverage rising from $150,000 before
2012 to $350,000 today.
a. Of the 32 states who have a CCW law (also called a prevailing wage law), only two have higher thresholds:
Maryland ($500,000) and Connecticut ($400,000 for new construction only).
b. Thresholds of neighboring states: Illinois ($0 all covered), Kentucky ($250,000), Ohio ($200,000 for
new construction), Michigan ($0 all covered).
2. Opponents claim that only 33% to 34% of the private construction workforce is unionized in Indiana in 2013-2014.
There are three major problems with this:
a. The data, from the Bureau of Labor Statistics Current Population Survey, are based on 126 survey
respondents in 2013 and 136 survey respondents in 2014 neither year is statistically significant.
b. The claim is based on the construction industry which includes such occupations as CEOs and owners,
lawyers, office and administrative support workers, and accountants of construction firms. These workers
are not covered under CCW. Only blue-collar construction occupations such as laborers, operating
engineers, electricians, carpenters, etc. are covered by CCW. Unionization rates are higher for these men
and women.
c. CCW is based on the local bidding market. In 2012 and 2013, union contractors were awarded 71% of bids
on public construction projects in fourteen Northern Indiana counties. In that market, with the majority of
work performed by union contractors, union wages tend to be the prevailing rate.
3. Opponents claim that Indiana taxpayers could save 10%-20% on public works projects if CCW was repealed.
a. Construction labor payroll and fringe benefits account for just 23% of total construction costs. For CCW
repeal to save 20%, labor costs would have to fall by 87.0% (paying workers below the minimum wage)
and worker productivity would have to stay the same!
i. [Math: 87% drop in labor costs x 23% share of total cost = 20% savings]

b. Study after study by economists has shown that prevailing wages have no impact on total project costs.
4. In Indiana, Illinois, Kentucky, Wisconsin, and Michigan, opponents of CCW and prevailing wage are citing a 2013
study by Alex Rosaen of the Anderson Economic Group, LLC (AEG) that has been completely discredited by an
academic economist at the University of Utah.
a. The report does not consider changes in worker productivity, materials costs, or labor-capital substitution.
Instead, he used an outdated wage differential approach which assumes no relationship between wages
paid and worker productivity, even though construction workers in states with a CCW have been found to
be more productive and better-trained than those in states without a CCW.
b. The AEGs estimates of a 25% drop in labor costs are based on unsound studies that used unrepresentative
surveys and did not provide evidence that higher wages were passed onto the government through higher
costs.
c. If more reasonable estimates on labor costs are used and productivity changes are incorporated into the
AEGs methodology, fewer public schools would be built by repealing prevailing wage.

5. Opponents of CCW have also cited a 2002 study by the Ohio Legislative Services Agency and claimed that the
report found that Ohio saved $488 million over five years as a result of repealing their CCW in 1997. Here is what
the report actually says:
a. The Legislative Service Commission (LSC) found indications of $487.9 million in aggregate school
construction savings during the post-exemption period, an overall savings of 10.7 percent. While it may
be reasonable to conclude that these savings are at least partially attributable to the prevailing wage
exemption, the extent to which this is the case cannot confidently be stated (Page 4-5) [emphases added].
There is no statistical evidence that prevailing wage laws were the reason for these savings. Correlation
does not imply causation.
b. Construction costs are a function of many factors. Analysis of construction costs should take into
account as many of the factors that influence construction costs as possible (Page 13). Recall that the
Anderson Economic Group report did not do this.
c. [N]one of the estimated savings meet the standards of statistical significance. The estimated savings are
considerably lower than the 20 to 30 percent savings that some opponents of prevailing wage laws have
claimed (Page 15).
d. Evidence was not available as to the portion of the estimated savings, if any, that could be directly and
conclusively attributed to the prevailing wage exemption (Page 49) [emphasis added].
e. Pages 56 and 57 report results from regression analyses, which control for other factors that could influence
project costs. For any factor to be statistically significant, the t Stat must be greater than 1.96 (or smaller
than -1.96 if the effect is negative). In all three cases the CCW variables (labeled PW) have no
statistically significant impact the cost of new construction projects or on additions.
f. Opponents who cite this study to oppose CCW either: are illiterate or do not understand economic
analyses or are purposefully cherry-picking an out-of-context savings estimate to mislead both Hoosiers
and legislators.
6. In June 2014, Midwest Economic Policy Institute, the University of Illinois at Urbana-Champaign, and Smart Cities
Prevail jointly released Common Sense Construction: The Economic Impacts of Indianas Common Construction
Wage. The report found:
a. CCW keeps Hoosier jobs local: In Indiana, 90.5% of all construction work was completed by in-state
contractors. This compares favorably states which do not have a CCW law (89.2%).
b. The CCW increased the Indiana economy by $700 million.
c. CCW increases tax revenues for all levels of government, including by $21 million for state and local
governments in Indiana.
d. Construction injury rates are lower in states with a CCW than in states with no law.
e. There are nearly twice as many apprentices in CCW states than in non-CCW states.