Most states have "prevailing wage laws" which require private contractors bidding for state or local public works projects, or private projects that are partially financed by the government, to pay a minimum package of wages and benefits to their workers. In the 1970s and 1980s many of these laws were repealed. One study finds that the effect of these repeals was a decline of union wages.

The study finds that repealing prevailing wages laws caused:

• A decline of average construction wages of 2 percent to 4 percent;

• A decline of approximately 10 percent in union wages;

• And an increase of the industry wage premium for black workers by about 4 percent compared to other workers.

The study concludes that the large union wage decreases account for the minor decline in average construction wages. Interestingly the finding for the wage premium increases for black workers is consistent with previous research that prevailing wage laws lower minority employment in the construction industry.

Source: David P. Kessler and Lawrence Katz, "Prevailing Wage Laws and Construction Labor Markets," Working Paper No. 7454, December 1999, National Bureau of Economic Research.

For NBER Abstract: http://www.nber.org/digest/may00/w7454.html