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important ingredients of success. Finally, living wage ordinances have to be rooted in a
broader “growth with equity” agenda, encompassing economic justice, high road
competition and redevelopment/industry clusters.
(vi) And a Postscript on Prevailing Wage Laws
Prevailing wage laws at state level requiring construction workers on state-funded works
projects be paid at levels prevailing for similar work in the geographic area of the project
largely postdate federal legislation in the form of the 1931 Davis-Bacon Act12 (although
eight states enacted wage laws between 1891 and 1923). As of 1969, 40 states had
prevailing wage laws on the books.
Analysis of the effects of federal regulation on wages and construction costs confronts an
identification problem - average wages in a location are themselves a function of the
prevailing wage - so that research has shifted to exploit differences in state prevailing
wage regulations (Thieblot, 1986). The most recent research focuses on the nine states
that repealed their prevailing wage laws between 1969 and 1993. Kessler and Katz
(1999) compare wage outcomes in repeal and non-repeal states (excluding Minnesota
which passed prevailing wage legislation in 1973) using a difference-in-difference-in
difference methodology and individual data from the Census and the Current Population
Survey. So the test is essentially the difference between the change over time in the
relative blue-collar construction/non-construction wage in the two sets of states. It is
reported that repeal is associated with a decline in the relative wages of construction
workers of between 2.3 and 3.9 percent. For union members however the relative wage
premium on construction work is reduced by 5.9 percentage points, which effect
increases to 11.2 percentage points after five years. Even if the immediate outcome gives
the better estimate of the equilibrium effect of repeal the outcome is still major, the union
premium being in the order of 20 percent. This careful study provides insights into the
opposition of unions to repeal of state prevailing laws and an indication of the rent
seeking that is involved in their passage. What is lacking is an equally careful analysis of
the political economy of repeal.