Guest View: Many myths within Rauner’s ransom

September 01, 2015 1:30 am  •  Clint Taylor Southern and Central Illinois Laborers’ District CouncilGov. Bruce Rauner renewed his call for pay cuts for tens of thousands of hard working Illinoisans last week as a condition to ending the state’s budget battle. “Rauner’s Ransom” demands have been consistently rejected with bipartisan opposition.That’s because Rauner’s outrageous assertion that cutting wages “is aimed at growing our economy” is not only counter-intuitive, it is just plain wrong. Taking money out of the hands of working- and middle-class consumers takes money out of the cash registers of local grocery stores, restaurants and other businesses, both big and small.When working families have income, they spend it. In the case of construction workers, it is estimated that they generate $188 of economic activity for every $100 they earn. Their investment in the local economy not only feeds, clothes and houses themselves and their family; it generates revenue for Illinois businesses and state and local government.How would Rauner cut workers’ pay? By eliminating the law that protects the wages of construction workers on local government construction projects. It’s called the Prevailing Wage Act and it not only benefits workers (both union and non-union) it prevents taxpayers from being ripped off by fly-by-night and low-wage out-of-state contractors.A study by the University of Illinois found that states that do not have prevailing wage laws have a greater likelihood of out-of-state contractors winning bids. That means fewer jobs for Illinois companies and workers. Mr. Rauner knows this, so he suggested in a letter to legislators that “local units of government could adopt local contractor preferences… to encourage Illinois-based workforces” as part of his pay cut plan. But that’s easier said than done. The state has had similar laws thrown out by the courts and local governments would have to spend tax dollars to defend preference laws. Why take that chance when the Prevailing Wage Act prevents minimum wage-paying contractors from undercutting our local businesses?Yet, the governor says eliminating the Prevailing Wage Act should be among the “tools to control costs” for local governments. But repealing prevailing wage won’t save money: the math behind Governor Rauner’s contention that the Prevailing Wage Act “drives up taxpayer costs by up to 20 percent” simply doesn’t add up.

Total labor costs on a construction job typically amount to only 20 to 30 percent of the entire project. So, you can’t shave 20 percent off of the project price by cutting the line item that represents only 20 percent of project. It’s impossible: the workers would have to work for free.

In fact, Rauner’s pay cut scheme won’t save taxpayers any money at all. Studies by numerous university economists all over the country have concluded that any “savings” from cutting workers’ wages is more than offset by losses in worker productivity. That’s because highly skilled construction workers leave low wage states to find work that pays better and workers who do go into construction don’t make it a career, so employers put less money into training.This lower productivity means more cost overruns and longer completion times. A review of federal highway projects found that workers in high wage states, such as Illinois, built a mile of road in 32 percent less time than in low wage states, more than offsetting the cost of fair wages. In fact, that study found that the cost was actually 4 percent less per mile in states like Illinois. Similarly, a University of Utah economist examined the construction costs of 400 schools in three states. That study found no significant difference in the cost between those built with or without prevailing wages.Democrats and Republicans in the legislature have rightly rejected Governor Rauner’s pay cut plan 10 times now because it’s bad for workers, bad for Illinois businesses and it won’t save taxpayers a dime. Mr. Rauner should stop holding the state budget and Illinois workers hostage and drop his demand to gut the Prevailing Wage Act.Taylor is business manager at the Southern and Central Illinois Laborers’ District Council. Source Article.

Leave a Reply

Your email address will not be published. Required fields are marked *