How one Illinois law jacks up the cost of government while harming construction sector employment
Illinois state lawmakers could stimulate employment and lower costs for overburdened taxpayers by repealing the state’s outdated prevailing wage law.
Illinois’ economy has lagged behind the rest of the nation for 50 years, according to data from the Bureau of Economic Analysis. This year alone, nearly 100,000 people have dropped out of the workforce. Legions of Illinoisans have fled the state in search of better job opportunities.
One reason jobs are scarce is that bad state policies make it too expensive to do business here. Data from the Bureau of Labor Statistics, or BLS, indicate construction jobs in Illinois were slow to recover from the Great Recession. Construction employment in Illinois is down nearly 30 percent over the last decade, one of the nation’s worst recoveries in that sector.
But repealing an outdated state law could provide hope for workers unable to find a construction job, as well as overburdened taxpayers, according to new research from the Illinois Policy Institute.
Illinois’ Prevailing Wage Act is a law that sets inflated wages that employers have to pay workers on public construction jobs.
While prevailing wages differ from county to county, the average prevailing wage in Illinois is 40 percent higher than the average wage for private construction jobs in the same area.
For example, the average carpenter in Cook County makes a wage of $31.04 per hour, according to BLS data. But Illinois’ prevailing wage law mandates a wage of $43.35 per hour for carpenters in Cook County on public construction projects.
These higher wages are a windfall for some lucky workers. But this policy benefits the few at the expense of the many – artificially inflated labor costs lead to job rationing and higher unemployment.
In states that repealed their prevailing wage, construction sector employment grew by almost 8 percent. Based on 2015 data, a repeal could mean 14,000 new construction jobs for Illinoisans over the next 10 years.
In addition to jobs growth, taxpayers would also save money if lawmakers repealed the state’s prevailing wage law. Even the leading economists in support of the prevailing wage concede that repealing the prevailing wage yields cost savings for construction projects. This is because labor costs make up 20 to 30 percent of construction costs.
These estimates suggest that a repeal of the prevailing wage could save taxpayers an average of 10 percent on public construction projects across Illinois. This means millions of dollars in savings for taxpayers struggling under one of the nation’s highest tax burdens.
Lawmakers have the opportunity this coming year to set Illinois on a better path forward.
For too long, Illinoisans have suffered under a high tax burden while at the same time struggling to find jobs – especially blue-collar jobs. Repealing the prevailing wage can play a major part in changing both of those realities.