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Construction Alert: Impact of Minimum Wage LegislationAs you are aware, Congress is debating a proposed increase in the minimum wage. Smith & Howard’s Construction Team recently received this opinion on the effect this legislation could have on the construction industry from Kenneth Simonson, Chief Economist, Associated General Contractors of America. Mr. Simonson’s opinion reflected the legislation under debate as of February 12, 2007.
The proposed federal minimum wage increase is not likely to have an immediate effect on nonresidential construction companies, most of which pay all workers more than the $7.25 floor which the bill would achieve in two years. In fact, there are two ways in which the increase could benefit construction. First, companies that cannot afford to pay more than $5.15 might turn to more capital, including structures, in place of labor. For instance, a carwash might install automated equipment to replace some workers. Second, displaced workers might seek jobs in construction, adding to the available pool of entry-level construction workers. Offsetting these benefits, firms for which higher labor costs cut into profitability are likely to spend less to expand or modernize, reducing their demand for construction services. All of these impacts are likely to be small, especially given that many states and localities already have minimum wage rates higher than the proposed federal floor. I am not aware of any studies documenting these impacts.
The Senate version of the minimum wage bill does contain a very harmful provision for contractors – mandatory 10-year debarment from federal projects for contractors that are found to employ an illegal alien. AGC of America is working hard to get this provision dropped from the final bill in a House-Senate conference committee.
The Senate bill contains some small-business tax provisions that would be helpful to some contractors. The House Ways and Means Committee is marking up a smaller package of such changes.
– Kenneth D. Simonson, Chief Economist, Associated General Contractors of America
This letter is distributed with the understanding that writer is not rendering legal, accounting or other professional advice or opinions on specific facts or matters and recommends you consult your attorney, accountant, tax professional, financial advisor or other appropriate industry professional before taking any action. This material may be affected by final details of the law as approved, changes in the laws or in the interpretation of such laws post publication. |
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