Commentary: Cutting wages would not help Kentucky create a more prosperous economy

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By Jason Bailey
Special to KyForward

Legislative leaders say the 2017 Kentucky General Assembly will focus on jobs and the economy. That priority is welcome given challenges across the state.

But the policy issues reportedly topping the to-do list — making Kentucky a right-to-work state and repealing the prevailing wage law — would not help, but would actually hinder the goal of creating a more prosperous economy.

Even with an improving economic picture overall, many Kentucky families and communities face a frustrating lack of jobs and wage growth. Glancing only at Kentucky’s low unemployment rate, you would think the economy had fully recovered from the Great Recession. A closer look shows that’s not the case.

The official rate only counts people as unemployed who are seeking work, but the long jobs drought led many to become discouraged. A better measure — the share of working-age Kentuckians actually employed — shows a big need for jobs still exists, and Kentucky’s rate is the second-worst in the country. Job gains in recent years have been concentrated in more prosperous areas in central and northern Kentucky. Eastern and much of rural Kentucky still have employment levels far lower than a decade ago (and they were too low then).

For those Kentuckians with jobs, wages have been stagnant for most of the last 15 years. Nearly 1 in 3 Kentucky workers make less than $12 an hour and many are stuck in insecure service-sector employment. At the same time, incomes at the top are soaring and corporate profits are reaching record highs.

A state agenda to take on these challenges would raise job quality standards through policies like a significantly higher minimum wage — especially needed after the state Supreme Court invalidated increases in Lexington and Louisville. It also would include greater investment in needs ranging from infrastructure to college affordability paid for by ending tax breaks benefiting powerful interests. That kind of agenda would create jobs by injecting new dollars in local communities while strengthening the foundation for future growth.

Instead, a right-to-work law and prevailing-wage repeal cut workers’ wages, taking job-creating dollars out of communities and worsening the job quality challenge so many Kentuckians already face.

Careful studies of right-to-work laws show they don’t lead to economic growth, including one by the University of Kentucky’s Center for Business and Economic Research. Other factors drive job creation, including the skills of the workforce, condition of the infrastructure and quality of life in communities.

Instead, by making it harder for workers to stick together on the job, these laws lower wages by an average of $1,558 a year and reduce access to employer-provided health insurance and pensions. And the wage and benefit reductions are felt by all workers in right-to-work states, not just those in unions.

It’s the same story with prevailing wage repeal. A new study led by an economist at Colorado State University says eliminating prevailing wage in Kentucky would lower construction worker income by 10 percent, reduce benefits and result in 5,700 of those workers qualifying for public assistance like food stamps and the earned income tax credit.

A repeal would also mean the loss of 1,800 Kentucky construction jobs to low-wage, out-of-state competitors. And the report shows savings on public construction from repealing prevailing wage laws are overstated. Wages are a small part of total project costs, and efficiencies are gained from the higher productivity of a workforce with more skills.

The way to build thriving communities is to grow the middle class, not shrink it by reducing workers’ pay. A state policy agenda on jobs and the economy should put that principle at the center.

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Jason Bailey is founder and Executive Director of the Kentucky Center for Economic Policy. He is the author of numerous reports and analyses of economic and fiscal issues facing the Commonwealth

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