New Law Will Strengthen Wage Law Compliance on Large Construction Projects

BERKELEY, Calif. /California Newswire/ — Last night, the City of Berkeley approved a first-of-its-kind local ordinance aimed at preventing wage theft on local construction projects, Smart Cities Prevail announced today.

 

Authored by Councilmember Laurie Capitelli, co-sponsored by a majority of the Council and supported by construction industry trade associations and workers’ rights groups, the measure requires that developers and builders certify that all contractors performing work on large projects have complied with state wage and hour laws as a condition of winning a certificate of occupancy from the city.

Click to Read the Ordinance: http://www.stopwagetheftca.org/index.php/berkeleys-new-wage-theft-ordinance/.

“Enforcing wage laws is especially difficult in the construction industry, because unscrupulous contractors who cheat workers in order to win bids on large projects find ways of disappearing after the work is done,” said Smart Cities Prevail Policy Director Scott Littlehale. “By expanding transparency and accountability BEFORE a project is complete, Berkeley has taken an important step towards preventing wage theft and leveling the playing field for honest construction businesses competing for this work.”

“This measure links our city’s responsibility for determining whether a construction project is completed with the principle of ensuring those who did the work are paid the wages they earned,” added Berkeley City Council Member Laurie Capitelli. “Whether as workers, businesses or taxpayers, we are all impacted by wage theft in some way. But we are not powerless to stop it, and that’s why I hope that other communities will soon join Berkeley in taking action.”

Research shows that wage theft annually costs California taxpayers at least $8.5 billion in tax revenue, and costs workers billions more in lost income. Because state enforcement resources are limited, workers only file claims in a fraction of cases and less than 20 percent of adjudicated claims are ever paid. The problem is especially pervasive in lower wage occupations, including California’s construction industry.

Smart Cities Prevail is a leading construction industry research and advocacy organization. More information on us may be found at www.smartcitiesprevail.org, or on Facebook https://www.facebook.com/SmartCitiesPrevail/ and Twitter https://twitter.com/cacitiesprevail.

StopWageTheftCA.org is a project of Smart Cities Prevail.

MEDIA CONTACT:
Todd Stenhouse, (916) 397-1131, toddstenhouse@gmail.com

 

*Editorial Note: above text based on press release, as provided by the news source: Smart Cities Prevail and was not created by CaliforniaNewswire.com.

A case study from Southern Indiana demonstrates how weakening prevailing wage negatively impacts local contractors and local workers.

Out-of-state contractors benefited after Indiana weakened its prevailing wage law, according to a new Economic Commentary from the Midwest Economic Policy Institute.

Despite an emerging academic consensus that shows state prevailing wage laws have no discernible impact on project costs, lawmakers in Indiana weakened the state’s law – called Common Construction Wage – between 2012 and 2015. In 2013, the threshold for coverage was increased from $250,000 to $350,000, meaning that workers were no longer paid a prevailing wage rate on projects costing between $250,000 and $349,999.

Prior to raising its contract threshold to $350,000, hourly earnings for construction workers in Indiana were similar to all neighboring states except Kentucky. Economic research suggests that out-of-state contractors with lower-paid workers will flood the public construction market after a prevailing wage law is weakened. If true, the greatest threat to Indiana contractors would come from across its southern border in Kentucky, where construction workers earned $5 less per hour on average in July 2012.

Indiana’s southern border with Kentucky is thus a good case study on the local impact of weakening prevailing wages. There are 13 southern Indiana counties that border 14 northern Kentucky counties.

After weakening prevailing wage, employment in the heavy and civil engineering sector declined in Indiana’s southern-most counties but grew across the river in Kentucky border counties. After the Common Construction Wage threshold was raised, southern Indiana’s public works construction sector had an employment loss of 885 workers (21.2 percent). Meanwhile, public works construction employment increased by 770 workers (20.7 percent) in the Kentucky border counties.

The average monthly earnings of employees in heavy and civil engineering construction careers also declined after prevailing wage was weakened in the Indiana counties but increased across the river in the Kentucky counties. After adjusting for inflation, the county-level earnings of public works construction employees declined by $439 per month for the average Hoosier worker. At the same time, average earnings increased by $610 per month for comparable workers across the border in the Kentucky counties.

In this integrated regional economy along the Ohio River, the evidence suggests that out-of-state contractors from Kentucky with lower-paid construction workers were the real beneficiaries of Indiana weakening its prevailing wage law.

After Indiana weakened its prevailing wage law, higher-paid public works construction workers in the state’s 13 southern-most counties were replaced by lower-paid workers across the border in 14 Kentucky counties. The redistribution of jobs and earnings to Kentucky construction workers has an adverse impact on income tax revenues and sales tax revenues in Indiana.

This case study should be a cautionary note to lawmakers in states across the Midwest who are considering weakening their state’s prevailing wage.Prevailing wage is a policy that promotes high-road economic and community development. Weakening prevailing wage only hurts local contractors and workers.