Governor Ernie Fletcher’s Communication Office
Study Finds Repealing Prevailing Wage Will Save 17 Percent on State Construction Labor Costs
Governor, State Budget Director announce results of prevailing wage study
FRANKFORT, Ky. – Governor Ernie Fletcher, joined by State Budget Director Brad Cowgill, today released a study confirming that repeal of the prevailing wage law would save approximately 17 percent on labor costs for 21 of the state construction projects which were included in the governor’s recommended budget, resulting in a savings of $39.1 million.
In addition, $20 million would be saved on projects authorized in the last budget but not yet under contract.
The analysis was conducted only on capital projects with a labor component for which state prevailing wage laws would be applicable. At the governor’s request, Michael Jones with the Governor’s Office for Policy Research calculated the savings on a list of projects provided by the governor. The governor referred to Jones’ calculations in his recent Budget Address.
The report is consistent with previous work by the Legislative Research Commission (LRC). Citing a 2005 study by an economist with the LRC, the study stated that current prevailing wages on public projects in Kentucky range from 18 to 30 percent higher than the current average wage for the same construction labor.
“Prevailing wage requirements on public projects were first passed in Kentucky one year before our country entered World War II,” said Governor Fletcher. “The concept of a prevailing wage in today’s global economy shows the law is well past its prime.”
Prevailing wage determinations are based on evidence submitted by contractors and labor representatives. Consistent with a 2001 study by the Legislative Research Commission, the study by the Governor’s Office for Policy Research concludes that, “Typically, the wage evidence submitted is over representative of union wages.”
The report also found that on average 38 percent of the total cost of construction goes toward paying workers and that the elimination of prevailing wage would save an average of approximately 7 percent of construction costs. County-specific prevailing wage labor cost savings ranged from 6.4 percent in Logan County to more than 40 percent in Mason County.
Governor Fletcher’s list of capital bond projects for his proposed budget, which total $939 million, takes into account savings of $39.1 million from repealing prevailing wage in the Commonwealth.
“Those savings will allow us to do more capital construction projects at our state universities or put more money into building schools on the local level,” Governor Fletcher added. “If Kentucky hopes to gain competitiveness in education with the dollars we have it’s essential that prevailing wage is repealed.”
Click here for an electronic copy of the prevailing wage study, which includes a county-by-county list of prevailing wage labor cost percentages