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. (C) 2004 Elsevier Ltd. All rights reserved.