State Prevailing Wage Laws and School Construction Costs

Abstract

Critics of prevailing wage laws claim that their elimination will cut total public construction costs by 15 to 25 percent. Justification for this assertion may be found in a 1983 study comparing the cost of public construction regulated by the Davis‐Bacon Act with the cost of similar private construction. However, this study failed to account for the difference in the cost of public and private buildings absent . Using F. W. Dodge data for 1991 to 1999, we show that the inclusion of the appropriate controls in a study of new school construction costs finds no statistically significant difference between the cost of public schools built with prevailing wage regulations.

Prevailing wage legislation and public school construction efficiency: a stochastic frontier approach1

“…Tests such as those conducted by Bilginsoy and Philips (2000) and by Azari-Rad et al (2003), which directly measure the impact of wage legislation of total costs, avoid this methodological problem. 4.…”

“…On the other hand, prevailing wage laws may create greater certainty over wage rates and may bring bid prices and final costs closer. Azari-Rad et al (2003) discuss the possible effects of prevailing wage laws on add-on charges, but no empirical research has examined the impact of prevailing wage laws on the level of construction cost overruns. 8.…”

“…However, this change is not statistically significant. Azari-Rad et al (2003) compare the cost of building public schools in states with different prevailing wage laws, or 'little DavisBacon' acts. They find that between 1991 and 1999 state-level laws added from 0.8% to 1.6% to the total cost of building public schools.…”

Prevailing Wage Regulations and School Construction Costs: Cumulative Evidence from British Columbia

“…Some of these studies exploit interstate variation in prevailing wage regulations to compare public school construction costs in states with, and without, the wage policy. For example, Azari‐Rad, Philips, and Prus (, ) report relatively small and statistically insignificant prevailing wage effects, ranging between 0.025 and –1.90 percent, on the costs of building schools across the United States. However, Dunn, Quigley, and Rosenthal () point out that cost estimates based on interstate comparisons may be biased because this approach does not take into account differences in state policies and institutions that may also be related to construction costs.…”

Globalization and Inequality: Explaining American Exceptionalism

“…Employers could hire scab workers to replace those on strike and then have the scabs vote as employees to decertify the union that originally called the strike (Azari-Rad et al, 2005). Together, the Taft-Hartley and Landrum-Griffin Acts took an increasing toll on the labour movement 15 beginning in the 1960s, especially as manufacturing began to decline.…”