Adventures in Mathematics: To Save 50% from Prevailing Wage Repeal, Workers Would Have To Pay To Work!

If you are in the Harrisburg area, tune in to WITF's Smart Talk at 8 p.m. tonight to hear a debate about the prevailing wage, including comments from yours truly in the opening news report.

In answering a reporter's question on prevailing wage, I was told about one claim that repealing the prevailing wage could lower total costs by as much as 50%.

Get out your calculator. If you lowered labor costs on a construction project by 99.99%, at most you would lower total costs by 24% (see the table below).

In other words, if you hear someone claim that eliminating prevailing wage would lower total costs by 50%, they are saying that construction workers would show up to work and not take a paycheck. In fact, they would pay to work on public projects!

Sound fishy to you?

Changes in total cost as a function of the share of labor cost on a $1 million public construction project (assuming labor represents 24%* of total cost)
  With P.W. Without P.W. % Change
Labor Cost $240,000 $24 -99.99%
Non-Labor Cost $760,000 $760,000  
Total Cost $1,000,000 $760,024 -24.00%

*According to the 2007 Economic Census of Construction, labor costs represent no more than 24% of total construction costs in Pennsylvania.


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