Three essays on labor market regulation in the American construction industry

This three-article dissertation focuses on labor market regulation in the American construction industry. The United States faces two parallel crises: one with affordable housing supply, and one with maintaining residential construction labor standards. Historically, issues with labor standards have been addressed on public works through prevailing wage requirements. Labor standards—while good for workers—may increase construction costs; higher costs, in turn, negatively impact low-income families by reducing supplies of affordable housing. In Chapter 1 of this dissertation, I re-examine whether this tradeoff exists and, if so, its implications. I estimate that prevailing wage requirements add, at most, 6% to the costs of affordable housing construction. The implicit baseline for this paper is the current practices in the residential construction industry, including the cost advantages realized by contractors engaging in illegal and undesirable practices. An alternative baseline would be the cost of building affordable housing for contractors who abide by labor standards, classify their workers correctly and pay the required amounts in social insurance and taxes.Informal employment, defined as the illegal misclassification of employees as independent contractors or employment of workers using cash-only payments, has long been rampant in the American construction industry. These actions rob workers of legally earned benefits, defund social programs, and undermine the competitiveness of law-abiding contractors. While enforcing labor laws has proved difficult, prevailing wage laws may make states abler to strengthen enforcement and limit informality. Under penalty of law, these regulations require employers to submit weekly certified payrolls to government agencies on public works projects, which increases governmental oversight. In Chapter 3 of this dissertation, I use state-level data from 2010-2019 to examine the relationship between prevailing wage laws and informal construction employment. State prevailing wage laws, even those of weak and average strength, are associated with significant reductions in informality.Lastly, Chapter 2 of this dissertation focuses on occupational licensing requirements in construction. Over time, disagreements have persisted over the effects of occupational licensing on markets and the appropriate role of government in the regulation of occupations. In Chapter 2, I exploit state variation in occupational licensing laws to examine labor market outcomes of occupational licensing in construction. Data on licensing comes from 2016-2019 Current Population Survey (CPS) data as well as a new 2019 data set on licensing requirements for the three primary construction occupations that require licensing in certain states: electricians, plumbers, and operating engineers. Consistent with prior literature, results suggest the presence of occupational licensing is associated with an 8.3 to 14.8 percentage point increase in earnings for electricians, plumbers, and operating engineers. Employment results are more mixed; while these results suggest occupational licensing is associated with a 1.2 to 1.3 percentage point increase in the proportion of workers employed as electricians, plumbers, or operating engineers, effects on the level of employment in these occupations were not statistically significant. In supplemental analyses I explore possible competing explanations for these employment findings.