What you need to know about Ohio’s prevailing wage law

A photo of the Ohio Statehouse from Wikimedia Commons.

In addition to the federal prevailing wage law, 26 states and Washington D.C. have their own versions of the legislation.

Ohio has a prevailing wage law on the books, but lawmakers in 1997 exempted school construction projects from its reach. Efforts to repeal or weaken the law have come and gone since then. 

With two state lawmakers currently targeting the legislation, the Capital Journal aggregated some relevant research and information on Ohio and its prevailing wage law.

What is prevailing wage?

When state money goes to a construction project that hits specific cost thresholds, Ohio’s “prevailing wage” law requires that contract winners pay wages set by a collective bargaining agreement.

If there is no collective bargaining agreement in the immediate locality where construction takes place, the wage is set to the collective bargaining agreement in the nearest locality.

In other words, it’s the state’s way of saying if you’re building stuff with our money, you have to pay your workers a certain minimum wage.

Proponents of prevailing wage legislation (notably, labor unions) hold that the increased wages don’t increase costs on construction projects, namely because they ensure quality work that won’t need patch-up jobs. They say the laws help keep money within a local tax base, and repeal efforts amount to anti-labor politics.

Opponents argue prevailing wage laws amount to an artificial economic control that jacks up the cost of construction. They say the laws reduce competition, impose unnecessary regulatory burdens and don’t provide any kind of quality guarantee.

Federal prevailing wage laws have been on the books since 1931.

What happened when Ohio exempted schools from prevailing wage?

Five years after schools were exempted, the Ohio Legislative Service Commission finalized research that found “indications” of $487.9 million in aggregate school construction savings due to the partial repeal during the post-exemption period. This amounts to overall savings of 10.7 percent.

The OLSC reached that figure by obtaining school construction activity data from a construction data and analytics company and parsed it to estimate costs with and without prevailing wage. However, the report warns that any number of variables could warp its figures including project size, location, labor markets and others.

The research also relied on surveys to contractors, which researchers said may be incentivized to inflate their data, which found the repeal led to savings between 5% to 10% without any appreciable impact on the admittedly “subjective concept” of construction quality.

Did those findings hold up over time?

In short, no.

Two separate academic research projects would go on to dispute the OLSC savings estimate.

“All in all, LSC’s claimed cost savings obtained by exempting school construction savings obtained by exempting school construction projects from Ohio’s prevailing wage law are based on flawed interpretations of statistical analysis,” wrote Herbert Weisberg, professor emeritus at The Ohio State University in a 2002 research paper.

Similarly, a research team from Bowling Green State University revisited and disputed the OLSC’s findings in 2012.

The BGSU team ran a statistical analysis of 8,093 bids received for school construction from 2000 through 2007 and found no significant difference between the bids for union contractors (who pay union wages effectively even with prevailing wage rates) and bids for non-union contractors.

They stopped short of a full-throated conclusion, however, and said more research is necessary.

“A potential reason for the lack of a statistically significant difference might be that wages and benefits for non-union workers were close to those of union workers due to the boom in the construction market during the years from 2001 to 2007,” the research states. “The boom created a shortage in the skilled workers market, which put a competitive pressure to raise the wages of nonunion workers.”

How does this apply now?

The unearthed OLSC research was reborn when state Reps. Ron Hood of Ashville and Bill Dean of Xenia cited it in a request for sponsors of their legislation to repeal the prevailing wage.

Just as we were able to provide relief for our Ohio schools in 1997, we now have the chance to help our local fire, police, and all Ohio government entities get more out of their tax dollars and improve opportunities for all contractors,” they wrote.

So which states do not have a prevailing wage law?

According to the Department of Labor: Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Michigan, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Utah, Virginia, West Virginia and Wisconsin.