Evaluating the Economic Effects of a New State-Funded School Building Program : The Prevailing Wage Issue

Two economic simulation models were used to study the economic impact of complying with prevailing-wage requirements in a $10 billion school construction program in New Jersey. Our econometric and input-output models suggest that compliance with the prevailing-wage statute will generate over $6 billion in personal income, a little more than $11 billion in gross state product, about 45,000 new jobs, and over $1.3 billion in state and local tax revenues will be created. If prevailing-wage requirements are not followed, there will be an impact on these results, and the extent of the impact depends markedly on the degree to which non-prevailing-wage workers spend their earnings in New Jersey and pay taxes. In general, prevailing-wage compliance has positive benefits for income and taxes. Non-prevailing wage construction should create more construction jobs, but these jobs create fewer additional jobs in the economy