A mix of state, local, and federal laws require contractors doing government work to pay a wage at or near the local average–known as the prevailing wage. The idea is that government work should not pay poverty wages or depress local rates. But groups on the right have tried for years to repeal the laws, claiming they inflate the costs of government contracts. A new EPI report by analyst Nooshin Mahalia looks at a large body of research in this area and finds that idea has been roundly debunked. She outlines a number of reasons, including improved productivity associated with higher wages, and the fact that labor costs typically account for only about one-fourth of construction costs. Meanwhile, she found that prevailing wage laws can enhance state tax revenues, industry income, and non-wage benefits for workers; lower future maintenance and repair costs; reduce occupational injuries and fatalities; and increase the pool of skilled construction workers–creating benefits for both the public and the industry. Mahalia concludes that the weight of the evidence strongly indicates that prevailing wage regulations have no adverse economic impact, and that their direct and indirect positive effects make them a prudent and beneficial policy.

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