The Economics of Prevailing Wage Laws
Paper Session
Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM
Hyatt Regency Chicago, Columbian
- Chair: Kevin Duncan, Colorado State University-Pueblo
Two Roads Diverge: Hidden Costs of the Low Wage Approach to Construction
Abstract
Misclassification and payroll fraud in US construction reduce income, property and payroll tax revenues. Construction activity emphasizing casual, low-skilled employment which extends layered subcontracting to small and sole-employee contractors, fosters payroll tax fraud and lowers income and property taxes paid by construction workers. Given their legal and economic vulnerability, we use undocumented construction workers as a proxy for both payroll fraud and misclassification. A 5 percentage point increase in the percent of undocumented workers—reduces income and property tax revenues by 17%. Because prevailing wage laws promote publically available payroll record keeping and government construction can account for 20% of all construction, we use the absence of prevailing wage laws as a facilitator of misclassification and tax avoidance. Controlling for other factors, in US construction, the absence of state prevailing wage regulations reduces income tax and property tax revenues from construction employment by 17%. The absence of state prevailing wage regulations reduces unemployment and worker compensation tax revenues by 9%. A doubling of the percent of all construction work subbed out, a proxy for layered subcontracting, results in a 12% drop in UI and worker comp tax revenues. Loss of income, property and payroll tax revenues hurts the public purse while reducing the construction industry’s ability to manage unemployment and injury risks through workplace insurance.The Education and Economic Impacts of Apprenticeship Programs in Illinois
Abstract
Apprenticeship programs represent one of the most successful avenues to train high quality, skilled workers for jobs in the construction and other industries. Research has demonstrated that training programs can address widening skills gap, create a pipeline of skilled workers, boost job retention, provide strong positive productivity returns for employers and increase lifetime earnings for workers. This study is a comprehensive examination of the education and economic impact of apprenticeship programs in Illinois. The analysis examines not only participation data but explores the direct and indirect value of financial investments in apprenticeship programs on the state's economy.The Fissured Construction Jobsite: Evaluating Labor Standards Regimes through an Organizational Resource Dependence Lens
Abstract
The fissured workplace, as elaborated by Weil (2010, 2014) has long been entrenched in the construction industry. Centralized firms have coordinated real estate development and construction through management of large networks of vulnerable specialty trade subcontractors for decades. Subcontractors respond by reorganizing employment relations and compensation practices within their firms, often by tapping networks of vulnerable workers and shifting a panoply of risks on to those workers. The paper uses Census and BLS data to illustrate how fissured construction jobsites have mutated once good blue collar jobs into bad jobs. Weil's framework extends beyond diagnosis of sources of labor standards degradation to prescription of strategic enforcement initiatives at the federal government level. This paper employs a resource dependence perspective (Pfeffer and Salancik 1978) to evaluate whether federal and state government labor standards enforcement regimes are positioned to exert sufficient external control over lead companies, prime contractors and subcontractors to substantially alter outcomes for construction workers. Data and experiences from California as well as from selected comparison states illustrate hypotheses that derive from the resource-dependence perspective. While federal and state governments are well positioned to promulgate and enforce labor standards in public works contracting, standards regimes where enforcement resources are concentrated within federal and state governmental organizations have more limited efficacy in shaping labor relations and outcomes in the private construction sector.Discussant(s)
Barry Hirsch
, Georgia State University
Dale Belman
, Michigan State University
JEL Classifications
- J4 - Particular Labor Markets