Minnesota is set to use $827 million in federal and state funds over the next six years to drive a $1.9 billion investment in broadband infrastructure — an important effort in addressing the state’s digital divide while raising worker income and expanding access to jobs. However, only a small fraction of Minnesota’s taxpayer-funded broadband projects adheres to prevailing wage standards, according to an extensive report from the Midwest Economic Policy Institute.
“Broadband Construction Projects and Prevailing Wage in Minnesota” details how prevailing wage laws are associated with more work for local contractors, better job quality for skilled construction workers, stronger apprenticeship programs, and superior economic outcomes for communities.
But exemptions on most broadband projects in Minnesota’s prevailing wage law delivers the inverse: fewer business opportunities for Minnesota-based contractors, lower wages for construction workers, and lower levels of workforce productivity, the report said.
The Minnesota Prevailing Wage Act covers virtually all public works construction projects. It requires employees working on such projects to be paid wages comparable to those paid for similar work performed in the same local area.
But these requirements are not applied to most taxpayer-funded state grants for Minnesota’s broadband projects, the report explained. All last-mile projects, as well as any project that receives state grants of less than $200,000 or loans of less than $500,000 are exempt from prevailing wage coverage in Minnesota. The report estimated that 241 of the 294 broadband infrastructure grants issued from 2014 through 2024 were not covered by prevailing wage standards.
“These exemptions meant that at least 82% of all projects and at least 76% of the investments made to expand broadband access since 2014 have occurred without prevailing wage coverage,” the report said, adding that these estimates are likely undercounted.
There is no assurance that workers earned market-competitive wages in this “massive investment using the tax dollars paid by Minnesota residents,” the report said. In addition, a lack of reporting and lack of enforcement means that both accountability and transparency has been absent from these broadband infrastructure projects.
In the study’s examination of 2017 projects, it showed a dramatic difference between the power and communication line segment of the industry — which includes broadband infrastructure projects and is mostly unaffected by Minnesota’s prevailing wage law — and the highway, street, and bridge construction segment of the industry — which includes prevailing wage coverage on nearly all projects.
Minnesota-based contractors performed just 37% of the work on power and communication line projects, while completing 86% of the work on road and bridge projects. The report, admitting that there could be many reasons for the disparity, said a significant factor is likely to be the lack of prevailing wage standards.
When compared with other states such as Illinois, which applies prevailing wage rates on broadband projects receiving state grants, Minnesota showed a much larger inequality among the two groups.
The intense focus on prevailing wages relates to the digital divide in Minnesota. Broadband investments not only enhance economic outcomes, they deliver important social benefits, as well. A broadband connection is associated with a 3% increase in the chances that a Minnesota resident is employed and a 4% annual income increase for a Minnesota worker.
Prevailing wage standards are consistently linked to better economic outcomes, enhanced job quality, improved workforce development, and greater safety — all without increasing overall project costs.
As one example, Minnesota broadband projects adhering to prevailing wage standards have averaged $5,700 per-connection (adjusted for inflation), 28% less than the $8,000 per-connection for projects without such coverage. Additionally, in industry sectors covered by prevailing wages, Minnesota workers achieve 29% higher productivity and earn an average of 19% more.
Among solutions to the problem, the report suggested eliminating the last-mile exemption; lowering the contract threshold to a project value of $25,000 (which it said is the standard on other state-funded public works projects); and including prevailing wage and other labor standards into the scoring system for awarding Minnesota’s broadband grants.
“Minnesota will only maximize the economic development impact of these investments if they are built by local contractors who are able to attract, develop, and retain skilled trades workers during a historic labor shortage,” the report concluded. “Without action, Minnesota risks either delays in constructing this critical infrastructure or significant leakage of taxpayer dollars to out-of-state businesses and nonlocal workers.”
A similar report from the Communications Workers of America said that broadband projects funded through the American Rescue Plan vary greatly when graded on transparency in project selection, equity in access, and labor standards.
