- January 14, 2016
- Keystone Research Center
- Stephen Herzenberg
Prevailing wage policies specify wage and benefit standards for construction projects paid for with public funds. In recent years, these policies have been the subject of vigorous debate in city councils, state legislatures, and the United States Congress. Often missing from the discussion is the broader effect of prevailing wage on the overall economy.
Prevailing wage laws were first established in the 1930s — both federally and in many states — to create a level playing field for all contractors and to protect against public construction projects driving down local wages and benefits in the construction industry. Some states have strong prevailing wage laws, some have no prevailing wage laws, and still others are somewhere in between.
This study poses the following question: “What would be the economic impact of establishing a prevailing wage in the state of New Hampshire?” By protecting local wage rates from market distortions associated with public construction procurement, prevailing wages expand work for local contractors and construction workers. Thus, New Hampshire could expect an increase in the amount of construction work that is completed by in-state contractors with a prevailing wage policy.
Using IMPLAN software — the industry standard in economic impact analysis — along with data from official government data bases (the Census of Construction, Current Population Survey and American Community Survey), the effects of prevailing wage laws were analyzed, and the outcomes were compelling.