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How Would a Change in Minimum Wage Affect the Construction Industry?

07 Apr 2021, Posted by F.A. in Tips
How Would a Change in Minimum Wage Affect the Construction Industry

The minimum wage has been in the news often lately. A failed provision in the latest Coronavirus relief package proposed a change to $15 an hour- the first change since it was raised to $7.25 in 2009. However, all indications are that Democrats in Congress will continue trying to increase the minimum wage, a change supported heavily by public polling. While a minimum wage increase would obviously help a large number of people, others wonder what it means for them. Skilled workers, like those in construction and concrete shoring, often make more than $15 an hour already, so what does this change mean?

Current Wages in Construction

According to the most recent data from the Bureau of Labor Statistics, no occupation within construction had a national mean or median wage below $15 an hour as of 2019, though some “helper” categories were close. But still, pay rates for construction vary heavily by state and are often varied by what sets the rate. Federally funded or union projects, for example, are often governed by prevailing wage rates. Some states, particularly Alabama and Florida, have several categories of construction occupations, including those who work in commercial construction, that do fall below $15 in mean and median.

As of today, 29 states and Washington, D.C. have minimum wages above the federal minimum. Five states have no minimum wage at all: Alabama, Louisiana, Mississippi, South Carolina, and Tennessee, and two states (Georgia and Wyoming) have a minimum wage lower than $7.25 an hour. In all seven of the latter states, the federal minimum wage kicks in. Overall, an increase to $15 nationally would raise the wages of about 20% of construction workers.

Union leaders are highly in favor of a raise to the minimum wage, citing the opening pathway to the middle class, increased productivity, and reduced need for social safety net programs. However, the change faces opposition in Congress, where both political and procedural hurdles are likely, as indicated by the American Rescue Act proceedings in March.

Other Considerations

Beyond the obvious impact of paying more per hour, employers in the construction space have expressed a range of concerns around a minimum range increase. Brian Turmail, Vice President of Public Affairs and Strategic Initiatives for the Associated General Contractors of America, has said their concern is more about the overall impact a bill like this could have on the economy, citing impacted demand for construction.

“It is important to remember that most construction careers already offer wage rates in excess of the federal minimum wage,” Turmail said. “In the few places where construction wage rates will be impacted, public and private construction owners need to be prepared to pay more for vital infrastructure and economic development projects.”

In other industry groups, some say the free market should establish wages rather than the government.

Kristen Swearingen, the Vice President of Legislative and Political Affairs for the Associated Builders and Contractors, agrees with this position. “ABC members, who represent the commercial and industrial segments of the construction industry, typically pay their employees well above $15 per hour,” she said. “It is important to note, however, that most construction industry occupations throughout the country pay well above the proposed minimum wage rate when wages are determined by the free market.

Rolling Out Minimum Wage Increases

While the initial proposal of $15 an hour did not pass, it is likely that the Biden administration will continue to push for a similar proposal. The Raise the Wage Act of 2021, introduced in the House in February, would take the approach of raising the wage over the course of seven years. On the effective date of the act, the wage would become $9.50 an hour, with annual increases until $15 is reached in 2025.

While the Congressional Budget Office has not presented an analysis on this act, they did issue a report on a similar failed bill in 2019. The median estimate showed that 1.3 million employed workers would lose their jobs, but 17 million workers would see pay increases. The report acknowledges some uncertainty when predicting job losses, as the number depends on employers’ reactions to a rule change.

Part of the job loss estimates included a two-thirds chance that the number of workers who lost their jobs due to an increase would fall somewhere between zero and 3.7 million. The CBO also said that many of the ten million workers who make slightly above $15 an hour in 2025 would see a wage increase as well.

Within the concrete forms and construction industries, only time will truly tell the ultimate impact that a minimum wage increase will have on workers and the industry itself.