Prevailing wage rates: The effects on school construction, levels of taxation, and state reimbursements

Prevailing wages are wages paid at state mandated levels to workers on public construction projects. In Pennsylvania, school boards are required to pay prevailing wage rates on all construction or renovation projects where estimates exceed ;The purpose of this study is to assess the financial impact of prevailing wage rates on school districts and the state. A series of research questions examine the issue from individual construction project to statewide consequences. The following comprised the research questions for this study: (1) What is the effect of the prevailing wage mandate on wage rates paid on public works contracts for school districts? (2) What is the impact of prevailing wages on total project costs paid by school districts on public works contracts? (3) What is the impact of prevailing wages on state reimbursement received by school districts on public works contracts? (4) What is the impact of prevailing wages on local taxation levied by school districts to pay for public works projects? (5) What is the total cost impact of prevailing wages paid on public works projects for school districts across the Commonwealth?;A microcomputer model of the relationships among the key financial variables in a school construction project was built to examine the impact of prevailing wages. Twenty-five schools, which had a construction project within the last three years, were randomly chosen from among predetermined economic regions. Both prevailing wage data and "market rates" for each project were collected and input into the model and the effects of any rate variances calculated. The results were extrapolated first to each economic region and then statewide. The result was an estimate of the dollar impact of the prevailing wage mandate for an state school construction activity, measured in terms of higher (or lower) construction costs, local taxes, reimbursement from the Commonwealth and the impact on school district taxpayers.