Myth: Prevailing Wage is a Veterans Issue

In a clever ploy, anti-free market and pro-labor union organizations are fighting back against efforts to repeal so-called prevailing wage laws by claiming that such a repeal would be a direct attack on veterans. At a time when veterans enjoy wide public respect in the aftermath of intense conflict in two wars, the argument packs a hefty political punch. But while the rhetoric is powerful, the evidence behind it is pretty thin, and the claim is easily debunked when the prevailing wage discussion is put in perspective.

The prevailing wage is a mandated compensation rate that contractors on certain public works projects must pay workers on those jobs. Not all states have prevailing wage laws, but many do, and the Davis-Bacon law requires governments at all levels to pay the federally calculated prevailing wage on projects over a certain size that utilize federal dollars.

Numerous states with conservative governors have considered partially or completely eliminating their state prevailing wage law requirements as a means of reducing regulation on the private sector, eliminating bureaucracy and saving taxpayers money on public construction projects. Wisconsin, for example, will have a partial repeal of its prevailing wage go into effect in January 2017.

But as the debate over the necessity or effectiveness of prevailing wage has grown, advocates of the status quo have sought to advance a series of questionable assertions about its usefulness. A secretive lobbying group ran television ads in Wisconsin in 2015 claiming a repeal of prevailing wage would flood jobsites with illegal immigrants. Calling a repeal an “illegal worker loophole,” the organization, which failed to disclose its IRS non-profit filings, was ultimately unsuccessful in its efforts.

In a May 2015 editorial for the Huffington Post, Jon Soltz of VoteVets.org astonishingly asserted that, “A repeal of state prevailing wage laws would be an economic disaster for veterans. Soltz also claimed that:

“Missing entirely from the debate over these laws is who they would impact the most. Military veterans, for example, pursue employment in the construction trades at substantially higher rates than non-veterans.”

But that’s a mischaracterization of the findings of an economic study commissioned by VoteVets.org to examine the relationship between veterans who work in construction and prevailing wage laws. A press release announcing the study declares that repealing or reforming, “prevailing wage at the state level will disproportionally hurt the hundreds of thousands post-9/11 veterans who are returning to the workforce.” In that same release VoteVets.org describes itself as “the largest progressive group of veterans in America.”

The study was conducted by the Illinois Economic Policy Institute, whose name bears a close resemblance to the labor union-funded Economic Policy Institute which conducts pro-union economic research, although IEPI does not appear to receiving funding from EPI according to available IRS documents. The gist of the report is that because veterans work in the construction industry, and because construction workers are the workforce impacted by prevailing wage laws, any changes to such laws are a veterans issue.

Even while acknowledging that only a small minority of construction workers are veterans (a reasonable fact given that at any given time the U.S. military makes up about 1% of the total population today), the study goes to great lengths to argue that veterans as a population group are more likely to be in construction trades than non-veterans.

The justification for this claim is that in 39 states veterans make up a larger share of the construction workforce than they do of the total workforce. For example, in Wisconsin veterans make up 5.48% of the total workforce, but they make up 8.3% of the construction trades. In Illinois, veterans are 4.51% of the total labor force but they are 7.39% of the construction workforce.

But this calculation is hardly an accurate way to depict veteran participation in a particular industry because it makes it appear as if more veterans work in construction than in other industries. In addition to being a small minority of construction workers, veterans are a small percentage of the total workforce.

According to the U.S. Census Bureau, younger veterans (post-1991) are less likely to work in construction than other industries. Referred to as “Gulf War” veterans (the first Gulf War was in 1991, the War on Terror is classified as the “Second Gulf War” in this Census data) they are more likely to be found working in management or protective service sectors than on a job site. A Census Bureau report on veteran employment describes it this way:

“Gulf War-era men were less likely to work in construction occupations and sales and related occupations, compared with nonveteran men.”

That statement, based on census data, blows a gigantic hole in the IEPI study which builds its entire premise that prevailing wage is a veterans issue off of the claim that veterans are more likely to be working construction than nonveterans.

Another glaring flaw of the study is that it fails to put into context the number of construction jobs that fall under prevailing wage requirements. Reading the study it would appear that the majority of construction jobs are bound by prevailing wage requirements, which in turn (according to the authors) substantially impact the incomes of veterans employed in the trades. But the reality is only a minority of total construction jobs fall under prevailing wage provisions.

In Wisconsin, for example, before the partial repeal of prevailing wage was enacted only about 20% of all construction jobs contained prevailing wage restrictions according to a pro-prevailing wage estimate. That means while 91.7% of construction workers in Wisconsin have never served in the military, 80% of all Wisconsin construction jobs never qualified for prevailing wage regulations.

Nevertheless, the IEPI study summary claims, “Prevailing wage improves economic outcomes for veteran workers. Prevailing wage standards make construction employment more attractive for veterans.” But the actual study explicitly states: “Prevailing wage laws affect all workers the same regardless of race, gender, veteran status, or any other factor.”

So either prevailing wage is a veterans issue, as the first statement asserts, or it is not a veterans issue because it applies to all workers equally regardless of veteran status, a noteworthy point given that the vast majority of construction workers are not veterans. The conflicting statements reveal the lengths to which pro-labor union groups will go to advocate for higher taxpayer costs on construction projects.

In addition to failing to point out how few total construction projects are bound by the prevailing wage requirement, the IEPI study authors also overlook any mention of compliance costs with prevailing wage. For small business owners and entrepreneurs of the sort often found in the construction trades, the complexities of complying with prevailing wage mandates can serve as a disincentive to bid on government jobs.

Finally, the study authors make the eyebrow-raising claim that military service is closely related to prevailing wage-regulated construction projects. “[B]oth military and civilian construction careers include elements of public service, from defending the country to developing the public infrastructure on which Americans rely,” they write. Certainly there is a degree of job satisfaction in both career fields, but prevailing wage or no prevailing wage, most job sites in the United States don’t involve getting shot at, nor do superiors have the freedom to push employees to work far more than 8 hours a day.

Not all veterans organizations agree with VoteVets.org, on this issue. Darin Selnick, a senior advisor to Concerned Veterans for America, is skeptical of prevailing wage laws and their impact on anyone – including veterans. “The transition from military to civilian life is often difficult for veterans, and finding gainful employment is an important first step,” Selnick said. “Prevailing wage laws disproportionately hurt entry-level job growth – the exact kind of jobs veterans need in that critical timeframe when they’ve just finished serving. Veterans fought for economic freedom and American prosperity abroad and they deserve it when they get home.”

Labor unions and aligned think-tanks and political groups are likely to continue to use the guise of veterans issues as a cudgel to beat free market policymakers over the head for daring to suggest reforms that save taxpayer money. But that doesn’t mean they are right; veterans are a significant part of the workforce, but that doesn’t mean increased government spending on labor costs for public works are somehow a veterans issue in the same way that, say, the healthcare shortcomings of the Veterans Administration are a veterans issue.

Originally posted to MediaTrackers.org.

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Brian Sikma

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