Published date: 03/22/2023
As new funding from the Bipartisan Infrastructure Bill continues to be pumped into the country’s public works projects every day, it’s no secret that there is a dire need for the construction industry to expand its output right along with it. The Bureau of Labor Statistics (BLS) projects construction employment to increase in the next decade, but that’s difficult to do when most of the industry continues to struggle with attracting and developing enough skilled labor to properly staff projects.
Which means every skilled worker in the industry counts… More importantly, it means every demographic and population – every slice of the overall workforce pie – counts. And that includes veterans.
Veterans in Construction
In public works, prevailing wage is the backbone to a fruitful, family wage-sustaining career for millions of workers. And for certain groups, such as military veterans, that type of career might even hold a bit more weight than it does for others. Which is yet another reason (among many) why those who oppose prevailing wage laws should consider reevaluating.
Why is This an Important Issue?
In recent years, the construction industry has become increasingly appealing to military veterans – not only due to the presence of robust prevailing wage laws, but because of initiatives like Helmets to Hardhats (sponsored by unions) and the United States Military Apprenticeship Program (USMAP) – a new outreach focus by the military. Their focus on promoting skilled apprenticeships help veterans transition to the civilian world and was providing over 20% of the registered apprenticeships in the country at the time of a study that was conducted in 2016 (which we will cover further in a moment). In fact, it was also found that veterans are nearly four times more likely to participate in registered apprenticeship programs compared to non-military workers.
As of 2014, it was estimated that roughly half a million veterans were employed as construction workers – with more expected since then. In the same study mentioned above, it was also found that military veterans pursue jobs in construction at substantially higher rates than non-veterans (again, we’ll dive into this further in a moment). Logic follows that any effort to weaken or eliminate these laws would have a disproportionate effect on the veteran population.
Two recent studies commissioned by the Midwest Economic Policy Institute and the Illinois Economic Policy Institute have analyzed the impact of prevailing wage laws on military veterans. They found that the economic conditions of veterans would be profoundly affected if states with strong-to-moderate prevailing wage laws were to weaken their standards.
The authors in both studies set forth the notion that prevailing wage laws are vital to all construction worker wages but are especially crucial for veterans whose post-military service work skews blue collar at a higher rate than other demographics.
The Midwest Study
At the time of this study, it was found that veterans constitute 6.9% of the blue-collar construction workforce in the U.S., despite making up only 5.8% of the country’s total workforce. In some states – like Wisconsin, for example – this trend is even more pronounced, where approximately 8.3% of all blue-collar construction workers are veterans.
The impact of prevailing wage laws on military veterans was found to be crucial for three main reasons. First, the wages received by veteran workers are eventually spent within local communities, creating a chain reaction that impacts every aspect of the economy. This, in turn, affects job creation, overall economic performance, and the amount of tax revenue that states have available to fund other public projects and services.
Second, these laws are created to align with local market conditions. Any changes to these standards in Wisconsin would impact the allocation of construction dollars within the state’s economy. And third, prevailing wage influences work site efficiency and materials utilization, which has a direct relationship with the issue of taxpayer value and a project’s total cost.
The Illinois Study
The Illinois study came up with some strong conclusions. It suggested that a national framework for prevailing wages make construction employment more attractive for veterans as it improves their economic conditions. In summary, they found that prevailing wages:
- Increase veteran employment in blue-collar construction occupations.
- Increase the annual incomes of veteran blue-collar construction workers by 7% to 10.7%
- Increase employer-provided health coverage for veterans in construction by 11.2% to 14.6%
- Reduce veteran poverty by 23.7% to 31.4% for those working in construction.
- Support 7,767 veteran-owned construction firms that would go out of business if the laws were repealed.
The study also claims that if all states with robust or standard prevailing wage legislation were to weaken or repeal their laws, the economic conditions of veterans would be negatively impacted. In particular:
- There would be a 65,000-job drop in the number of veterans employed as construction workers nationally.
- The job separations and earnings losses would result in a $3.1B decline in veteran incomes in construction.
- The number of veterans without health insurance would increase by 24,000.
- About 5,000 employed veterans would earn incomes below the federal poverty line.
How Does Repealing Prevailing Wage Laws Impact Project Costs?
Most recent investigations on this topic that have been academically conducted and peer reviewed have not supported the notion that prevailing wage laws raise the overall cost of construction. Instead, it has frequently been found that they lead to higher efficiency and cost savings on materials, fuel, and equipment. The idea that cutting wages will lower costs stems from an inadequate understanding of public works construction.
A key issue with this assumption is that labor costs only account for a fraction of the total construction costs. In the case of Wisconsin’s prevailing wage standards, labor costs and benefits account for approximately 20% of the total costs. It is therefore not feasible to achieve significant savings from a cost element that makes up such a small portion of the total.
The two studies demonstrate that the utilization of experienced construction labor is highly responsive to wage rates. When wages are lowered, less skilled workers tend to replace the more efficient craft workers. Research indicates that states with strong or average prevailing wage laws have a value-added per construction worker that is 11% higher than states without such laws.
Moreover, states with prevailing wage laws experience lower material and fuel costs due to several changes that offset any savings from reducing wage rates. In essence, the benefits of lowering wage rates are canceled out by these changes. These findings align with the vast majority of research indicating that the cost of public works projects, such as schools, highways, and sewer projects, remains unchanged despite the presence of prevailing wage laws at the local, state, or federal level.
If you’d like to learn about solutions that can help you remain compliant and streamline your certified payroll reporting process, check out www.lcptracker/solutions/.
These materials are being issued with the understanding that LCPtracker is not engaged in rendering legal or other professional services and is providing these for informational purposes only. If legal, accounting, or tax expert assistance is required, the services of a competent legal, accounting or tax professional should be sought.