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Study: Prevailing Wage Laws in Minnesota Do Not Significantly Increase Costs

MN prevailing wageDespite healthy skepticism from many in the construction industry, prevailing wage laws are one key way to attract more quality workers without significantly boosting costs on projects. That’s according to a newly released study that found those laws do not lead to increased costs for publicly funded projects in Minnesota.

The study issued this month was called "An Examination of Minnesota’s Prevailing Wage Law: Effects on Costs, Training and Economic Development," and was conducted by researchers at the Midwest Economic Policy Institute and Colorado State University-Pueblo.

Despite what critics of prevailing wage laws have argued for years, the researchers found that prevailing wages actually stabilized construction costs.

72% of peer-reviewed studies over the past two decades determined that the laws had no impact on the cost of public construction projects. Other studies examining more than 2,100 public project bids found that competition for bids was not affected by prevailing wage requirements.

This new study found that a higher, stable prevailing wage helps to attract much-needed new workers into the construction industry and gives those in the trades benefits like health insurance and pensions, which reduces their dependence on government assistance programs.

“By protecting local wages, prevailing wage laws also protect work for local contractors and construction workers,” the researchers wrote.

“The policy allows local contractors to submit competitive and profitable bids based on the wage rates needed to attract local workers possessing the skills required of the project. Local contractors thus have an advantage over out-of-area, out-of-state, and foreign competitors," the researchers argued. "When local companies and workers are employed on a project applying the payment of prevailing wages, more project funds remain in the local economy and stimulate additional economic activity.”

The evidence of the benefits, they wrote, "is illustrated by the examination of 681 subcontractor low bids on school projects built within the seven-county Minneapolis-St. Paul metro area since 2016, revealing that 74 percent of total bid values for prevailing wage projects were awarded to metro-based contractors."

“For projects in the seven-county area that did not apply prevailing wage standards, only 64 percent of combined bid values were awarded to local contractors,” they said. “This difference indicates that, when a school district located within the seven-county metro area chooses to include prevailing wages, about 10 percent more of the project value will be awarded to contractors located within the metro area.”

The full study is here.