Do Lower Prevailing Wages Reduce Public Construction Costs?

In 1997, the Pennsylvania Department of Labor and Industry implemented a change in its method of determining prevailing wage and benefit rates, resulting in a reduction in the legally required prevailing rates in many construction trades in much of the state. This report analyzes data to determine if this change in fact lowered the cost of public construction projects. It concludes that this claim is not supported. It asserts, for example, that data on public school construction costs show no strong evidence that Pennsylvania's lower prevailing wages and benefits reduced construction costs charged by contractors performing public works. The report also finds that lower prevailing minimum wages paid to workers have no measurable impact on public construction costs partly because wage declines lead to offsetting declines in productivity. (EV)