Research Summaries

PREVAILING WAGE
RESEARCH

CHRONOLOGICAL LIST OF DOCUMENTS BY AUTHOR

NOTES

While all of the documents listed in this section are not located on this web site, they can all be accessed directly by clicking on “Full text.” In all cases, documents will open into their own windows (either pdf or html) from which they can either be downloaded or printed out (or both).
Summaries of many of the documents are also available. Just click on “Summary.”
When available, bibliographic information (e.g. journal publication name and date) has been included. However, because many of these materials were commissioned by legislative bodies, public sector agencies, or private sector organizations, there may not be any academic or trade journal citation.

PREVAILING WAGE
LIST OF AUTHORS

Click on the Author’s Name to go to the beginning of his/her list of documents

Peter Philips
Mark J. Prus
Herbert F. Weisberg

[Click here to go directly to “RESEARCH SUMMARIES”]

PETER PHILIPS
Ph.D., Professor of Economics, University of Utah

Losing Ground: Lessons from the Repeal of Nine "Little Davis-Bacon" Acts. Peter Philips, Garth Mangum, Norm Waitzman and Anne Yeagle. 2/95 (98 pages)
(Summary) (Full Text - Acrobat PDF file)

Square Foot Construction Costs for Newly Constructed State and Local Schools, Offices and Warehouses in Nine Southwestern States. Peter Philips. 9/96 (48 pages) (Summary) (Full Text - Acrobat PDF file)

Kansas and Prevailing Wage Legislation. Peter Philips. 2/98 (56 pages)
(Summary) (Full Text - Acrobat PDF file)

The Facts About the Prevailing Wage Law. 3/99 (4 pages)
(Summary) (Full Text - Acrobat PDF file)

Kentucky's Prevailing Wage Law: It's Histrory, Purpose and Effect. Peter Philips. 11/99 (91 pages) (Summary) (Full Text - Acrobat PDF file)

Prevailing Wage Regulations and School Constructions Costs: Evidence From British Columbia. Peter Philips and Cihan Bilginsoy. Journal of Education Finance, Winter 2000. (22 pages) (Summary) (Full Text - Acrobat PDF file)

A Comparison of Public School Construction Costs In Three Midwestern States that Have Changed Their Prevailing Wage Laws in the 1990’s. Peter Philips. 2/01 (16 pages) (Summary) (Full Text - - Acrobat PDF file)

Four Biases and a Funeral - Dr. Vedder's Faulty Experiment Linking Michigan's Prevailing Wage Law to Construction Employment. Peter Philips. 2/01 (Summary) (Full Text - - Acrobat PDF file)

Making Hay When It Rains: The Effect Prevailing Wage Regulations, Scale Economies, Seasonal, Cyclical and Local Businesss Patterns Have On School Construction Costs. Peter Philips. 2/02 (Summary) (Full Text - Acrobat PDF file)

MARK J. PRUS
Economics Department, State University of New York, Cortland, N.Y.

The Effect of State Prevailing Wage Laws on Total Construction Costs. Mark J. Prus. 1/96 (15 pages) (Summary) (Full Text - Acrobat PDF file)

Prevailing Wage Laws and School Construction Costs. Mark J. Prus. 1/99 (34 pages) (Summary) (Full Text - Acrobat PDF file)

HERBERT J. WEISBERG
Professor, Ohio State University

Analysis of Regression and Surveys in Ohio LSC Report on S.B. 102 on Claimed Cost Savings from Exempting School Construction from Prevailing Wage Requirements. Herbert J. Weisberg. July 8, 2002 (14 pages) (Summary) (Full Text - Acrobat PDF file)

RESEARCH SUMMARIES

PETER PHILIPS
Ph.D., Professor of Economics, University of Utah

Losing Ground: Lessons from the Repeal of Nine "Little Davis-Bacon" Acts. Peter Philips, Garth Mangum, Norm Waitzman and Anne Yeagle. 2/95 (98 pages)
(Full Text - Acrobat PDF file)

The study examines the impact of repealing state prevailing wage laws on 9 states that repealed their statutes between 1979 to 1988. The report compares the 9 repeal states with the remaining 32 states with prevailing wage laws and the 9 states that never enacted prevailing wage laws.

From this detailed comparative analysis the authors found several clear and profound by negative effects of repeal.

While most closely examining the impact of repeal in the state of Utah, the authors emphasize the worsening level of worker wages, benefits and training as well as increased worker injuries and greater number of project change orders and cost overruns in all states reviewed.

Square Foot Construction Costs for Newly Constructed State and Local Schools, Offices and Warehouses in Nine Southwestern States. Peter Philips. 9/96 (48 pages) (Full Text - Acrobat PDF file)

Prepared for the State of New Mexico Legislature, the study compares actual public square foot construction costs in the five Southwestern and Intermountain states that have state prevailing wage laws with the four states in the same region that do not have state prevailing wage laws.

These five “have law” states are New Mexico, Texas, Oklahoma, Wyoming and Nevada.

The four “no-law” states are Arizona, Utah, Idaho and Colorado.

During the period of the study, 1992-94, elementary and middle schools cost less per square foot in the five-state group with prevailing wage laws.
The conservative conclusion from the actual construction cost data is that cost differences found between states does not provide support for the proposition that the elimination of prevailing wage law saves on public construction.

Kansas and Prevailing Wage Legislation. Peter Philips. 2/98 (56 pages)
(Full Text - Acrobat PDF file)

The report is a case-study comparison of new school construction costs in Kansas compared to the surrounding Great Plains states that have retained their prevailing wage laws.

The conclusion finds no difference in square foot construction costs between comparable states with and without prevailing wage laws.
Training and productivity levels did drop however after the Kansas prevailing wage repeal.
Especially noted were drops in wages, minority apprenticeship-training and employer contributions to pension, health and welfare programs.
In addition to these negative results Kansas reaped a costly, higher injury rate in construction.

The Facts About the Prevailing Wage Law. 3/99 (4 pages)
(Full Text - Acrobat PDF file)

Kentucky's Prevailing Wage Law: It's Histrory, Purpose and Effect. Peter Philips. 11/99 (91 pages) (Full Text - Acrobat PDF file)

The comprehensive report on Kentucky’s prevailing wage law analyzes actual construction cost data, historical information, training, health and safety statistics to rebut the myths surrounding prevailing wages.

Beyond its focus on Kentucky, the author includes a lengthy chapter on the history and economic impact of prevailing wage laws on minorities in the national construction industry.

The report also examines the positive impact the Kentucky prevailing wage law has had an improving worker benefits, training and job safety.
The study concludes that not only are prevailing wage jobs not more expensive, but they achieve solid benefits in the form of lower injuries, greater minority employment, a larger pool of skilled workers, and increased health and welfare benefits.

The report examines the proposition that eliminating prevailing wages reduces school construction costs by analyzing the unique final construction cost data from the United States and British Columbia, CA. Specifically focusing on the prevailing wage law in British Columbia (BC) where public construction wages must reflect 90 percent of the collectively bargained wage rate for each construction occupation, the report utilized final cost data from new elementary and secondary public school construction projects from six school districts in BC tendered between 1989 and 1995.

The conclusion of the study rebuts the proposition that BC’s prevailing wage law was the sole or main factor in school construction costs in the period examined.

A Comparison of Public School Construction Costs In Three Midwestern States that Have Changed Their Prevailing Wage Laws in the 1990’s. Peter Philips. 2/01 (16 pages) (Full Text - - Acrobat PDF file)

The report focuses upon the states of Ohio, Kentucky and Michigan to examine whether or not the application of prevailing wage regulations raises construction costs, and if so, by how much. Specifically, the report analyzes new public school construction in the aforementioned states over the period of 1991-2000 to assess statistically whether or not changes in the prevailing wage policies as they applied to public school construction raised or lowered the cost of building public schools.

The analysis of the school construction completed in the three states during the periods when prevailing wage laws were in effect, suspended or repealed found no statistically significant difference between those schools built with or without prevailing wage regulations.
In fact, on a number of instances school construction costs actually rose, such as in Ohio, subsequent t repeal of the state’s prevailing wage law.

Four Biases and a Funeral - Dr. Vedder's Faulty Experiment Linking Michigan's Prevailing Wage Law to Construction Employment. Peter Philips. 2/01 (Full Text - - Acrobat PDF file)

. . . . .

MARK J. PRUS
State University of New York, Cortland, N.Y.

The Effect of State Prevailing Wage Laws on Total Construction Costs. Mark J. Prus. 1/96 (15 pages) (Full Text - Acrobat PDF file)

The first study is the first to look at the actual construction costs of prevailing wage projects on a variety of construction projects since the flawed 1983 study of unrelated regional areas, "The Effect of the Davis-Bacon Act on Construction Costs in Rural Areas," (Fraundorf, 1983). The Prus study analyzes the impact of prevailing wage legislation on total construction costs using data on nonresidential construction in the United States from the F. W. Dodge Company. These data give information on construction costs at the start of the project, or bid price.

The study also contains information on detailed structure type, project location, project scale and technical characteristics of the project such as the number of stories and type of frame.
The report also favorably compares the cost and related factors between public, private and federal projects on a regional basis.

Prevailing Wage Laws and School Construction Costs. Mark J. Prus. 1/99 (34 pages) (Full Text - Acrobat PDF file)

This comprehensive study was commissioned at the request of the Council of Prince George's County, Maryland to analyze the impact of prevailing wages on actual costs for public school construction projects in Maryland and the Mid-Atlantic States. The county is embarking on a major six year capital program for the construction and renovation of public schools and wanted four areas reviewed:

A comparison of school construction costs in states with prevailing wage laws to those in states without prevailing wage laws in the mid Atlantic region.
A comparison of school construction costs within Maryland for those local jurisdictions that pay prevailing wages to costs in those areas where prevailing wage rates are not required.
An analysis of the extent to which local contractors have been harmed by unfair competition from outside contractors due to the absence of prevailing wage requirements on school construction projects.
An examination of the extent to which the absence of prevailing wage rates in school construction impacts construction wages across the construction industry.

Based upon a statistical analysis of actual construction cost data on individual school construction projects provided by the F. W. Dodge Corporation found conclusive evidence of the positive impact of prevailing wage laws on construction quality, labor markets, worker wages and construction costs.

. . . . .

HERBERT J. WEISBERG
Professor, Ohio State University

On May 20, 2002 the Ohio Legislative Service Commission (LSC) issued Staff Research Report #149 claiming $489 million of cost savings since S.B. 102 took effect in August 1997 exempting school construction from the state's prevailing wage requirements. They used data from F. W. Dodge. This cost-savings estimate is based on a statistical procedure known as regression analysis, BUT EXAMINATION OF THE STATISTICAL ANALYSIS IN THE LSC REPORT SHOWS THAT ESTIMATE IS NOT VALID.

The main statistical problem is that the LSC Report's regression equations explain a miniscule portion of the differences in costs between projects. Regression estimates would be meaningful only if the equations account for 70+% of the differences between projects, but these account for only a trivial 1% to 3% of the cost differences. The regression equations do not fit the data, so the cost-savings estimates are statistical fiction.

Additionally, the LSC equations find prevailing wage to be statistically insignificant, meaning that there is no statistical reason to believe that prevailing wage affects costs. A small cost savings might not be found significant, but it is not reasonable to claim that an effect leading to nearly $500 million in cost savings would not be found significant if it were real. In fact, every preceding analysis of Dodge construction data for Ohio and other states has found that prevailing wage does not significantly increase costs, and the LSC Report actually confirms that finding.

Finally, the Dodge data that the LSC analyzed show only the construction costs at the start of projects. They do not show the final construction costs, which can be considerably higher if the company lacks the expertise to keep the costs within the level of the bid. Therefore, the estimated cost savings are not relevant to actual project costs.

All in all, LSC's claimed cost savings obtained by exempting school construction
projects from Ohio's prevailing wage law are based on flawed interpretations of statistical analysis.