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Repealing prevailing wage law would weaken state economy

Mounting state budget deficits as well as debt from underfunded pensions have prompted calls for the repeal of Illinois' prevailing wage provisions for publicly financed construction projects in order to save taxpayer money.

But the costs of Illinois' prevailing wage law are less than the substantial positive benefits it has for the state economy, says new research co-written by a University of Illinois labor expert.

According to Robert Bruno, a UI professor of labor and employment relations, prevailing wages for public construction projects in Illinois provide numerous positive economic and social outcomes for construction workers and the state.

"There are enormous implications when you attempt to undermine a standard for compensation and health and safety, especially in an occupation as dangerous as construction work," said Bruno, also the director of the Labor Education Program in Chicago.

Bruno and his co-authors argue that repealing Illinois' prevailing wage law would not result in any significant savings for taxpayers or the state.

Critics of the law claim it inflates the costs of government contracts by compensating labor at levels higher than market wages.

Bruno said prevailing wage laws are intended to regulate labor markets and serve to establish minimum or community standards in labor markets. Repeal of the law would result in job losses throughout the state's economy as well as increases in construction worker fatalities and declines in construction worker benefits and training opportunities, he said.

According to the research, the indirect effects of the law's repeal would result in about 3,300 net jobs lost; a contraction of more than $1 billion in state gross domestic product annually; and more than $44 million in lost state and local taxes as well as roughly $116 million in lost federal tax revenue.

"This is one of the key policies that allows the state of Illinois to sustain a high-wage economy," Bruno said.

Prevailing wage laws mandate that contractors and subcontractors pay all workers employed on taxpayer-financed projects no less than the general prevailing rate of wages (including benefits) where the work is performed.

The study forecasts that employment in the construction industry would likely increase if the statewide law were to be repealed. But any new jobs linked to the law's repeal would be significantly offset by job losses experienced throughout the rest of the state, and would likely cost the state money and reduce construction sector efficiency, Bruno said.

"We took a very conservative approach in running our impact model, and we still found that the overall net impact of repealing the law would be a decrease in the total number of jobs in the state, all due to the reduction in wages," said labor education specialist Alison Dickson Quesada, one of Bruno's co-authors.

If prevailing wage laws were to be repealed in Illinois, the researchers estimate that an additional seven Illinois construction workers would die each year from work-related injuries.

Although not statistically significant because of the small sample size, the numbers in the paper suggest that states with prevailing wage laws suffer fewer work-related casualties in the construction sector than states with no regulations, the researchers said.

Additionally, the data examined in the study strongly affirm the claim that state prevailing wage laws support construction apprenticeship programs, a critical component for an industry continually concerned about the availability of sufficiently skilled workers, the researchers say.

Phil Ciciora is business and law editor for the University of Illinois News Bureau.

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