Custodians Could Realize Financial Gains From Prevailing Wage Laws

The application of prevailing wage laws can boost incomes for custodians by up to 10%, at a time of growing concern of labor shortages in many frontline service, custodial, and food service occupations, according to a study conducted by researchers from the Illinois Economic Policy Institute (ILEPI) and the University of Illinois at Urbana-Champaign’s Project for Middle Class Renewal (PMCR).

The national study is the first of its kinds on the application of prevailing wage laws outside of the construction industry and found strong gains for minorities employed in service occupations.

Currently, federally funded construction and non-construction service jobs are already subject to prevailing wage requirements, which ensure that public expenditures reflect local market standards for wages, benefits, and workmanship in the communities where work is being performed. While 27 states also have enacted prevailing wage laws for state-funded construction projects, just eight (New York, California, Illinois, New Jersey, Montana, Massachusetts, Connecticut, and Washington) have prevailing wage laws covering state or utility contracts for food, custodial, security, and other services. 

“In the low-bid public contract model, prevailing wage laws not only play an important role in protecting local market standards, but protecting workers most vulnerable to exploitation,” said study co-author and ILEPI Executive Director Frank Manzo IV. “Additionally, by turning more low-wage jobs into living-wage jobs, research shows that prevailing wages often have the added benefit of offsetting higher worker earnings with reductions in employee turnover costs borne by businesses and government assistance costs borne by taxpayers.”

The ILEPI and PMCR researchers examined U.S. Census Bureau data to compare economic outcomes for custodians employed in states with service contract prevailing wage laws to those employed in states without.  They applied industry-standard statistical analysis techniques called regressions to control for observable factors such as education, gender, race, geography, and marital, veteran or immigration status.

Researchers found enacting service contract prevailing wage laws would result in a 6% to 10% increase in the average custodian’s income as well as a 1% to 2% increase in the rate of health insurance coverage. They said data also suggested fewer custodians would live below the poverty line in states with service contract prevailing wage laws.

“Even when compared to other policy interventions such as raising the minimum wage, service contract prevailing wage laws mean higher incomes, more access to health coverage, and better job stability,” said Dr. Robert Bruno, study co-author, a professor at the University of Illinois at Urbana-Champaign and director of the PMCR “And with the data showing that non-white workers are 34%  more likely to be employed in custodial occupations, it is clear that the biggest economic gains from these laws are being realized by People of Color.”