Wisconsin’s Approach to Determining Prevailing Wages Flawed

In early fall of 2014, officials from Associated Builders and Contractors (ABC) approached the Wisconsin Taxpayers Alliance (WISTAX) regarding the feasibility of studying Wisconsin’s prevailing wage law. They sought an evaluation of the soundness of Wisconsin’s approach to calculating prevailing wages and an estimate of what, if any, additional costs this approach imposes on governments, particularly local ones. Those discussions led to a formal WISTAX study proposal which was subsequently approved by ABC.

From the outset, the goal of the research was not to evaluate the strengths or weaknesses of prevailing wage laws. Rather, our aim was to study the state’s method of calculating those amounts from both statistical and sample survey perspective. In performing that analysis, we found at least two methodological “flaws” that tend to raise prevailing wages above market rates. Prevailing wages here tend to be 23% higher than averages from a statistically-valid federal survey of the same Wisconsin employers; and when prevailing wages and benefits are combined, they average 45% more than typical compensation packages estimated from the same federal survey.

This has fiscal implications for state and local governments. In 2014, the state Department of Workforce Development issued prevailing wage determinations for about $1.9 billion in building and heavy construction projects. If prevailing wages had reflected average wages and benefits, state and local governments—and taxpayers—could have saved as much as $299 million on those projects.

The research staff at the Wisconsin Taxpayers Alliance thanks the Department of Workforce Development and its expert staff for their help in navigating the arcane mechanics of Wisconsin’s prevailing wage law. We also appreciate ABC’s confidence in WISTAX’s public-finance expertise to analyze this little-studied and highly-complex issue.

Sincerely,
Todd A. Berry
President, Wisconsin Taxpayers Alliance