New study says prevailing wage repeal has led to lower construction costs

28 August 2018

(WV News)

CHARLESTON — A new academic report from researchers at the University of Kentucky found West Virginia’s repeal of the prevailing wage in 2016 has led to lower construction costs for public projects.

The report, released last week from the university’s Center for Business and Economic Research (CBER), is the first bit of evidence to show how the state is faring since the wage requirement was repealed.

“Comparing projects bid with and without prevailing wages since 2013 suggests construction costs per square foot decreased by 7.3 percent since the removal of the wage requirement,” according to the report.

Prevailing wage mandated a minimum wage for state-funded construction projects.

American Builders and Contractors Inc. contracted with the university’s CBER to complete the report. The report looked at the construction cost per square foot of schools built when the prevailing wage was intact and the cost after the prevailing wage was repealed.

“What we have with this study is a very close and thorough examination of what is ultimately a very difficult topic to properly evaluate,” said Brian Hoylman, president of the state’s ABC chapter. “The CBER took the time to look at the effects this policy decision has had from a variety of angles and under an impartial lens. The evidence here clearly speaks for itself.”

But the report does say its findings are limited. First, the report does not take into account for other factors that might have influenced the cost of construction other than the square foot of the project.

“The second limitation is that only a few schools have been bid without the prevailing wage requirement,” the report reads. “Differences between one or two schools can significantly affect the comparison. As West Virginia builds more schools, the state will get a better indication as to how its prevailing wage law affected construction costs.”

The report also warns that having a prevailing wage might improve construction safety, since contractors might be incentivized to hire more skilled workers who might have fewer accidents.

“Prevailing wage laws also might improve construction quality,” the report said. “If there is a quality effect, lower long-run maintenance costs might offset, in part, higher initial construction costs.”

One of the schools included in the study is the new Chapmanville Intermediate School.

Steve White is the director of the Affiliated Construction Trade, which provides services to construction groups across the state. White said that although the bid cost for the Chapmanville school might have come in below bid, the project will cost much more than anticipated in the long-term.

“It’s the most problematic school that’s been built in years,” White said. “It’s down in Logan County, and it was supposed to be done June 30 and it’s still not done today. That’s a huge problem. I’m told it might not be done until November.”

Ted Boettner, executive director of the left-leaning West Virginia Center on Budget and Policy, said that until the report’s authors release the data they used to complete their work, it’s difficult to draw too many conclusions.

“The report is inconclusive and it finds no direct link between the repeal of West Virginia’s state prevailing wage law and school construction cost savings,” Boettner said. “The findings are based on a few schools. It is unclear what they are including in the costs, and it says nothing about the wages that were paid to construction workers. The difference in site prep costs alone between schools is often more than the 3 to 7 percent cost savings touted in the report.”

Boettner also pointed out that proponents of repealing the prevailing wage said that its repeal could save 25 percent on publicly funded projects, but that the report’s estimated savings are nowhere near that much.