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White paper cites various studies indicating that when wages increase in the construction
industry:
A) Greater use of skilled labor
B) Increased use of equipment
C) Lower material costs (implying more efficient construction when wages are higher).
Two things to point out:
1. Caution with labor cost calculators: Last session estimate cost effect of higher wage rates,
holding labor and equipment use constant.
Not supported by what we observe in the industy.
I understand the desire to use data relevant to VT, but this is not a reliable method
It would not be acceptable for anyone familiar with the industry or research.
2. Since labor costs are a low percent of total construction costs, productivity does not need
to increase much to offset prevailing wage rates.
This is why the preponderance of research indicates that PW are unrelated to construction costs.
Not aware of any study of a state adopting Davis-Bacon prevailing wages.
Several examine related issues:
A) My current research on highway resurfacing projects in Colorado:
From at least the mid 1990s to 2002 union rates prevailed the jobs involved in resurfacing.
In April of 2002 to 2011, average rates prevailed for 11 of 13 occupations.
18% reduction in hourly compensation for 11 jobs.
No difference in cost of federal projects relative to state funded resurfacing work.
No difference in the level of bid competition
When I examine contractors who move between federal projects and state projects, no difference
in costs even tho they are moving between Davis-Bacon and market wage rates.
B) Introduction of PW in BC in the early 1990s:
PW rates 20% higher than nonunion rates.
No change in the cost of covered projects relative to privately funded construction (schools and
assorted other buildings).
Other studies:
Howard Wial: A change in the Pennsylvania policy from union rates to union and average
rates. No taxpayer savings on construction costs.
Peter Phillips: School construction in Michigan, Ohio, and KY in the 1990s when PWLs
changed in these states. No change in school construction costs was PW changes.
Dunn, Quigley and Rosenthal: Introduction of PW to low income housing in Ca adds from 9
to 37% to construction costs. Multiple problems with this study.
Provision of health insurance to the industry.
Fringes do not prevail for all sections of VT.
Contractors that do not provide fringes shift costs to tax payers and hospitals.