Cost Impacts of Prevailing Wage Laws in Construction

A major survey of the U.S. Construction Industry has recently been concluded by the MIT's Department of Civil Engineering. Data from this study permit a preliminary assessment of the impact of the Davis-Bacon Act and other prevailing wage laws on construction labor costs. The effect on direct wages was found, as expected, to be generally upward. However, Davis-Bacon prevailing rates were found to be lower than union rates in many cases, and sometimes even lower than true average wage rates for a given area. The effect of prevailing wage laws on productivity, typically assumed to be negligible by critics, was found to be positive. This study did not attempt to quantify these productivity gains, but nevertheless provided strong evidence for their existence. Finally, the study identified several types of indirect costs resulting from prevailing wage laws, which amplify their effect on public construction costs.