Eighty five percent of the costs associated with housing construction in California are unrelated to the wages or benefits paid to the workers who actually build it.
And since 1990, those wages, adjusted for inflation, have actually decreased by 25 percent and been redistributed into profit margins for developers, which are growing 50 percent faster than the cost of materials or labor.
Developers got most of what they wanted in housing reform legislation that Gov. Jerry Brown signed into law this month. And yet the building industry continues to complain about wages that are going to be paid to construction workers on certain projects.
The builders claim that they will need to raise prices to grow their already bulging bottom lines if they have to pay their workers enough to live. But there’s no real evidence to support this assertion.
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In reality, the elimination of red tape on new housing construction likely will save most developers far more than any modest increase in their workers’ wages.
Peer-reviewed research on prevailing wages shows no impact on total project costs, because these standards promote skills training and quality workmanship that increase productivity and reduce spending on fuel and materials. And because they are market rates that reflect local cost of living, they save taxpayers the cost of subsidizing below market wages with welfare expenditures.
These aren’t abstract academic theories.
In 2015, the state of Indiana repealed its prevailing wage law. Earlier this year, the Indiana Assembly assistant Republican floor leader was asked about the effect on project costs. His response: “It hasn’t saved us a penny.”
In West Virginia, which repealed its prevailing law in 2016, a similar dynamic taking shape. Blue collar construction wages have been slashed as much as $15 an hour, pushing more workers off the job or into poverty. No project cost savings have materialized.
Elementary schools have had their openings delayed due to workmanship problems labeled as “unsafe” by engineers.
The Building Industry Association and others have poured millions into peddling tall tales about prevailing wage and project costs. But if you check the math, you’d find that to realize their rosy projections, construction professionals would need to work for free. In other words, the senseless demagoguery of prevailing wage is about little more than Robin Hood in reverse.
It’s also about something uglier. One in six construction workers in California faces some form of wage theft. Often, this involves cheating on payroll taxes or overtime. And when there are no wage standards in place, it’s easier for unscrupulous employers to get away with a crime that costs taxpayers almost $1 billion every year, and costs workers and their families another $1.2 billion.
A California Building Industry Association lobbyist recently told The Sacramento Bee that “our members could see their whole business plan gone” with the inclusion of prevailing wage.
With construction industry wage theft up by 400 percent since the 1970s, and the entire industry reporting labor shortages, now might be a good time to rethink that model. That’s especially true in light of the huge need for workers to rebuild after the wine country fires.
State housing reform was a victory for all of California. The industry will be able to do more building, and it will attract and retain more of the skilled workers it needs to boost productivity. More supply will put downward pressure on prices.
More trained workers will reduce waste and the risk of shoddy workmanship and defect litigation. Taxpayers will have fewer workers to subsidize through public assistance, and more protection from the wage theft epidemic that is also draining public budgets.
And yes, more construction workers will be able to pay the rent in their communities.
Samantha Draper is a research analyst for Smart Cities Prevail, a construction industry research non-profit whose board includes representatives of business and labor, firstname.lastname@example.org.