Prevailing wage laws reduce income inequality between African-American and white construction workers by as much as 53% and help more blue-collar workers reach the middle class, according to new research by the Illinois Economic Policy Institute (ILEPI) and University of Illinois at Urbana-Champaign’s Project for Middle Class Renewal.
“While prior research has concluded that there is no relationship between prevailing wage laws and the racial composition of the construction workforce, the data clearly shows that these laws help eliminate income disparities between black and white construction workers,” said study co-author and University of Illinois Professor Robert Bruno. “African Americans employed as laborers, plumbers, pipefitters, electricians, and heavy equipment operators see the largest gains.”
Utilizing publicly-available data from the American Community Survey, the study examined construction worker earnings by race and trade, comparing the results between states with prevailing wage laws and those without. Overall, the researchers found that prevailing wage laws lift the incomes of African American construction workers by an average of 24%, and close the income gap with white workers from 26% to just 12%.
A more advanced analysis controlling for other observable factors found that states which currently do not have a prevailing wage law could reduce income inequality for African-American construction workers by at least 7% if they implemented one.
Based on surveys of local construction employers, prevailing wage laws establish local-market minimum wages for publicly-funded construction projects like roads, bridges, and schools. These projects represent roughly one-third of all output in America’s 4th largest industry, which employs roughly 6.5 million workers.
“A stable minimum wage floor benefits all workers, regardless of race or construction trade,” added study co-author Jill Manzo. “By ensuring similarly-skilled workers performing identical jobs with the same equipment are paid the same, prevailing wage promotes the concept of equal pay for equal work.”
The national Davis-Bacon Act applies prevailing wage standards to most federally-funded construction projects, but projects funded exclusively by state and local governments are not affected unless a state prevailing wage law is also on the books. Currently, 27 U.S. states have these laws.
The study also used American Community Survey data to track average take-home incomes for the ten largest skilled construction crafts, and compares those figures against the average annual salary of all U.S. workers ($47,258). In states without prevailing wage laws, not a single average skilled craft salary reaches the nationwide average. With prevailing wage, at least two crafts exceed this threshold (operating engineers and electricians), while one other falls just short (plumbers, pipefitters, and related occupations).
“For the largest skilled construction crafts, prevailing wage laws improve incomes by between $1,800 and $12,000 per year,” added study co-author and Illinois Economic Policy Institute Policy Director Frank Manzo IV. “These laws clearly have the effect of reducing poverty and giving more blue-collar workers of all races a chance to join the middle class.”