Benefits vs. Wages: How Prevailing Wage Laws Affect the Mix and Magnitude of Compensation to Construction Workers
This chapter examines the impact of the repeal of state-level prevailing wage laws on compensation to construction workers. Using data from the 1980s and 1990s, we compare compensation levels of construction workers in (1) states that never had prevailing wage laws, (2) states that repealed their prevailing wage laws, and (3) states that have retained their prevailing wage laws. Specifically, we examine the impact that prevailing wage laws, and their repeals, have on compensation to construction workers, in terms of both wages and benefits. We also examine the relationship between prevailing wage laws and the mix of compensation packages between wages and benefits. We find that compensation levels to construction workers are significantly higher under prevailing wage laws. When states repeal the prevailing wage law, compensation levels decline to the levels of states that never had prevailing wage laws. We also find that prevailing wage laws are positively related to the share of benefits in compensation packages. Given the economic incentives in the construction sector that discourage the provision of benefits, the latter result is of particular importance.