Paving the High Road | Narrative

Opportunities and Threats Shaping the Future of Iowa’s Construction Industry

by Sean Finn

December 10, 2024 | Download the PDF | News release

Introduction

As federal initiatives spark massive investments in our state’s infrastructure, Iowa’s construction industry is experiencing an exciting new phase of growth. But even as the spotlight shines on this expanding industry, in its shadow are illegal and dangerous practices that have been quietly worsening over the past decade.

Left unchecked, this underground economy — built on exploiting workers, cutting corners on safety and quality, evading tax and insurance obligations, and committing wage theft — will push more and more high-road contractors out of business.

This report explores the many opportunities for fair and responsible industry growth and delves into the challenges posed by the industry’s complex, disparate structure. By spotlighting the realities faced by workers, we aim to ignite a conversation on strong public policies that can improve conditions for all construction industry workers.

Threats within industry impede fair, responsible growth

• Illegal employee misclassification
  At least 10% of Iowa construction trades workers were illegally misclassified as independent contractors in 2022. This practice, which fraudulently strips employees of legal protections such as minimum wage and overtime laws to save on wages, workers’ compensation, employment taxes and unemployment insurance, is on the rise in the construction industry in Iowa and nationally.

• Tax fraud and wage theft
  Low-road contractors who misclassify employees, fail to pay overtime and engage in other types of wage theft cost Iowa workers an estimated $43 million a year. They cost state and federal government millions in avoided income, Social Security and Medicare taxes.

• Lack of accountability
  Over the past decade, Iowa’s construction industry has become increasingly reliant on unregistered labor brokers and illegally misclassified employees. Even when contractors knowingly hire low-road subcontractors, they virtually never face consequences when worker rights are violated on their projects.

• Worker exploitation
  Erosion of workers’ rights laws and enforcement leave Iowa workers increasingly at risk of exploitation, particularly on non-union worksites. Community organizations working with construction workers report rising instances of injuries, nonpayment of wages and other abuses. These risks are intensified for workers who may feel vulnerable due to language barriers or immigration status, particularly in the context of recent anti-immigrant state laws.

• Low-wage work and poverty
  Far too many workers in the construction industry work long hours yet still struggle to make ends meet for their families. Because so many jobs pay low wages, construction workers are more likely than workers in other industries to rely on safety-net programs like Medicaid and SNAP.

• Restrictive state policies
  Iowa lawmakers have slowed down wage and job growth in the construction industry by banning local governments from using policy tools like project labor agreements and prevailing wages, which increase the use of local labor and provide good, well-paying jobs without increasing the cost to the public.

Emerging opportunities can help achieve fair and responsible growth

• Union membership
  Although union density in Iowa’s construction industry has been declining under many years of anti-union policies, the influx of federal investments that promote good, union jobs may help turn the tide. Unionized construction workers are able to negotiate for better compensation and workplaces, and they experience greater employment stability than non-union construction workers.

• Federal investments: Grants, loans and tax credits
  Billions of dollars, spurred by federal investments, are flooding into the state for infrastructure improvements and new energy production. This will create thousands of strong local jobs for trades workers and rapid industry growth.

• Incentives for good jobs
  Tied to the federal investments, prevailing wage and apprenticeship requirements will ensure new projects pay good wages and provide new pathways to work for a diverse, young population.

• Strong policy solutions
  Iowa leaders have a variety of ways to address concerning trends in the construction industry, from increased enforcement of labor standards to worker empowerment through relationships with community organizations. At every level, leaders can act to effect change and pave a new, high road.

 

Complexities of the construction industry contribute to special challenges

Special aspects of the construction industry offer important context for threats and opportunities. The complex hierarchy that funnels money to the top, combined with the drive to win contracts by having the lowest bid, create a natural race to the bottom: too many contractors will do everything they can to cut costs and win bids, including exploiting workers and deprioritizing safety. This makes it absolutely crucial for governments to enact and enforce labor standards that prevent the industry from spiraling downward.

“Lowest Responsive, Responsible Bidder”

In the construction industry, competitors strive to offer the lowest possible bid. Low bids win contracts, after all. Nowhere is this more important than in public bidding, in which state and local entities are required by Iowa law to award contracts to the “lowest responsive, responsible bidder.”[i]  In practice, this is almost always interpreted solely as the lowest responsive bidder, with “responsive” referring to whether the bidder met the basic requirements laid out in the invitation to bid. It is rare for Iowa government officials to also assess the degree to which the bidder is “responsible,” meaning that reputation and track record of standards compliance do not count for much in the public bidding process. However, it remains the local government’s decision whether the lowest bidder is also responsible.[ii]

The Big Lowest-Cost Exception

A significant exception to this lowest-bidder rule is the federal Davis-Bacon and Related Acts (DBRA). Davis-Bacon is designed to ensure that federally funded construction projects maintain the pay standards of the local economy in which the work is being completed.[iii] It requires the government to set a regional prevailing wage — the wage that most workers in the region are paid — for a variety of jobs and requires contractors to pay at least that wage. Under DBRA, competitors for federally funded contracts still work to have the lowest bid but can’t achieve that by paying low wages.

Historical Safeguards and Standards

Davis-Bacon is just one of the policies and labor standards that lawmakers, under the pressure of worker-led unions, have enacted over the past century to protect the health, safety, dignity and well-being of the construction workforce.[iv] Over the decades, local and state licensing and registration requirements established minimum standards for competency and accountability, and federal standards like the Occupational Safety and Health Act and the Fair Labor Standards Act were designed to protect employees from being underpaid and working in unsafe conditions.

Figure 2. Fighting for workers' rights

Iowa workers gather at the State Capitol in 1947 to advocate for their rights.

Despite the success of these policies at improving working conditions for construction employees, some industry players persistently seek ways to reduce costs by skirting enforcement of these laws.[v] Although that is not unique to this particular industry, the construction industry stands out as a sector in which the problem of illegal employer behavior is on the rise.[vi]

In Iowa, the culture of disregarding standards is exacerbated by lawmakers’ recent actions, such as the 2023 attempt to undercut federal child labor laws by passing SF 542, which set some safety and health protections for children lower than baselines enforced by the U.S. Department of Labor.[vii] In another example, the Iowa Department of Transportation (IDOT) launched a “federal-aid swap” program in 2018 that allows local governments to avoid federal DBRA labor standards by swapping out the federal funds for state funds.[viii] A comprehensive analysis of the federal aid swap program reveals that it not only failed to yield cost reductions in highway construction projects, it actually increased total costs by as much as 25%.[ix]

The Hierarchical Maze

Many construction projects involve multiple contractors. Because work is project-based, it is common for contractors to need extra labor on a case-by-case basis. When they win a contract, they turn to other contractors to complete certain steps or provide workers. This creates multiple levels within a single project. For example, imagine a new hospital is being built. The contract for building the facility is awarded to one company, which then hires contractors for plumbing, electrical and HVAC. The HVAC contractor then hires other contractors to complete installation of air vents and heating and cooling systems. These subcontractors also hire workers from other contractors to get all the work done on time. Zooming back out, the entire project is overseen by the general contractor who received the contract in the first place.

With multiple levels of contracting and subcontracting, accountability becomes elusive. Claims of unpaid wages and worker abuses often result in a blame game, with subcontractors pointing upward, general contractors pointing downward, and workers left confused about which company is their true employer.

The Hidden Middlemen

The complex structure of construction work allows unregistered and often untraceable employers known as labor brokers to operate in the shadows. Labor brokers supply labor for contractors by recruiting workers for them, often using unethical and illegal tactics like paying cash under the table, hiring minors, misclassifying employees as independent contractors, and failing to meet safety standards.[x] Contractors, well-aware of these brokers’ practices, frequently negotiate a single project payment with the labor broker, who then distributes the cash among workers as they see fit. Recruited workers frequently receive pay below the minimum wage and fail to receive overtime pay.[xi] 

Figure 3. Complex structure of many construction projects causes accountability problems

Sample construction organizational chart

Working the Construction Season

Temporary unemployment is more common in construction than most industries, especially in states like Iowa where winter weather makes work impossible several months each year. Many workers put in long hours and make family-sustaining paychecks through most of the year, then face several months of, at best, inconsistent part-time work during the off-season. It is common for these workers to be laid off once a year, after which they seek unemployment insurance to help get them through to the next job. Iowa’s unemployment insurance law was originally designed to sustain the economy through the ups and downs, including a provision to waive work searches for maintaining unemployment coverage and another that allows for two-week extensions of payments after the layoff period when there are short-term circumstances beyond the employer’s control.[xii] These provisions have come under attack in recent legislative sessions.[xiii]

Figure 4. Key factors distinguish independent contractors from employees

Cost cutting drives misclassification, wage theft, tax fraud

In the construction industry, as we know, low bids win contracts. A consequence of this policy is that contractors typically find as many ways to cut costs as possible, in some cases reducing labor costs by committing tax fraud, paying workers under the table, and misclassifying workers.[xiv]

Employee misclassification happens when an employer illegally categorizes their employees as independent contractors. Employers abuse the independent contractor designation to evade employment costs and taxes, leaving workers responsible for expenses like workers' compensation insurance, unemployment insurance and payroll taxes. This causes the worker to seemingly lose the protections and rights of being an employee — think minimum wage, overtime, family and medical leave, and Social Security. In reality, the worker is frequently entitled to employee rights and the employer is in violation of labor law.

While it may seem like a small difference to many (after all, wages are wages, right?), the consequences of misclassification are real and cumulative. Workers can accrue substantial medical debt due to workplace injuries and face hefty tax bills during the tax season — all while unaware of their employer’s illegal actions denying them worker’s compensation and the employer’s share of payroll tax contributions.[xv]

Evidence of Wage Theft and Misclassification

Evidence of wage theft in Iowa’s construction sector is stark and alarming. Our conservative estimates reveal that wage theft in Iowa’s construction sector amounts to over $43 million annually, harming more than 12,000 construction workers. This problem of wage theft has exploded over the past decade, with overall wage theft in the state increasing by 50%, reaching a staggering $900 million in 2022.[xvi] 

Publicly available data show clear evidence of misclassification in Iowa’s construction industry. We reviewed worker reports of employment within the construction industry from the U.S. Census Bureau’s American Community Survey (ACS) and compared them to the number of employees reported by businesses in the U.S. Department of Labor’s Quarterly Census of Employment and Wages. We found that there are over 30,000 more worker-reported jobs than employer-reported jobs in Iowa’s construction sector. While some unknown proportion of this discrepancy is accounted for by self-employed individuals with no employees, between 12,000 and 20,000 Iowa construction employees were misclassified as independent contractors in 2021 — anywhere from 10% to 18% of the industry’s workforce.[xvii] 

The costs of these illegal practices to workers, financial and otherwise, are massive. The estimated per-worker cost of misclassification for construction employees is between $4,769 and $10,066 each year, due to denial of overtime pay and little or no benefits. Using our most conservative estimates of the number of construction workers misclassified and costs, the estimated annual cost of misclassification to Iowa construction workers is $57.1 million. The true cost may be as high as $200 million.[xviii] 

Enforcement Failures

State and federal enforcement of wage payment laws and labor standards is deeply lacking. Between 2018 and 2022, construction workers filed 278 wage claims with the Iowa Division of Labor.[xix] Only 44.4% of these claims resulted in any amount of back pay, and the average case in which back pay was awarded took 80 days to resolve. During the same period, the federal Department of Labor received about 30 wage claims from Iowa construction workers, recovering a modest $22,394 in total back wages.[xx]

Over the past five years, these agencies recovered a combined average of $32,693 per year in back pay for wronged Iowa construction workers. Considering our annual worker cost estimates of wage theft ($43 million) and misclassification ($57.1 million), their efforts recover less than 0.1% of the value stolen from affected workers. The massive gap between these figures has several causes; workers may not notice the employer’s behavior or know that it’s illegal, they may be afraid of retaliation or find the process of reporting too cumbersome or confusing, and the enforcement agencies’ resources and practices are not sufficient to address the cases that are filed.[xxi]

The Public Cost of Tax Fraud

Low-road contractors don’t just pass their costs on to their workers — they also shift costs to taxpayers and starve public safety-net programs of resources through nonpayment or underpayment of payroll taxes, income taxes and workers' compensation insurance premiums. A 2020 study by Ormiston et al. conservatively estimated that fraud in the construction industry causes shortfalls to federal income tax revenue between $319 million and $1.26 billion and to Social Security and Medicare between $1.36 billion and $4.28 billion.[xxii] An estimated $33.3 million is lost in payments avoided to Social Security and Medicare annually — that amount could pay for about 18,000 monthly Social Security checks.[xxiii]

The same dynamic holds in Iowa. Misclassification creates an estimated $13.8 million annual shortfall in Iowa’s unemployment insurance fund and a $32.4 million shortfall in workers’ compensation insurance premiums each year.[xxiv] 

Figure 5. Gap between worker-reported and employer-reported construction jobs shows scale of misclassification practices in Iowa

Figure 6. Calculating the cost of misclassification to Iowa construction employees

Worker exploitation and abuse are commonplace

The construction industry’s growing culture of tax fraud and wage theft is often coupled with a disregard for worker safety and well-being. Shocking stories of this are everywhere — workers injured on the job, denied immediate medical attention, coerced into silence. When an illegally misclassified employee is injured on the job, a hospital visit can arouse suspicion when it’s revealed that the individual is not covered by workers’ compensation. In the end, the workers lose out massively — not only are they responsible for paying the stack of medical bills, but any resulting inability to work is not covered by disability insurance, either. The industry’s most vulnerable workers take the brunt of these illegal and dangerous practices.

Disaster-Response Work

Facing population expansion, urban development and human-induced climate change fueling an escalation in the frequency and financial toll of weather-related catastrophes,[xxv] communities everywhere are grappling with the aftermaths of these events. In recovery areas across Iowa, contractors swoop in to meet the demand for reconstruction, bringing with them an influx of local and out-of-state workers vital to rebuilding devastated regions.[xxvi]

Figure 7. More frequent and intense weather catastrophes place new demands on the construction industry

Little is understood about the allocation of disaster-response spending to local and out-of-state contractors. When disasters occur, local residents often struggle to find contractors who can take on their projects because of the massive localized demand. Local and labor leaders should study and document the ways construction businesses and their workers participate in disaster recovery and gain a better understanding of how this affects the local economy and workers. The very nature of disaster-response work exposes workers to toxic chemicals and hazards, with repercussions that extend long after the completion of their duties in cleanup and recovery projects.[xxvii] Regardless of where they reside, Iowans should care about and protect the safety and well-being of the workers who come to their aid. A fair and responsible future for Iowa’s construction industry must feature a renewed respect and appreciation for disaster-recovery workers who rebuild our communities through strong labor protections.

Figure 8. Billion-dollar environmental disasters in Iowa become increasingly common

Number of environmental disasters in Iowa with cost over $1 billion, 1980-2024

Abuses of Immigrant Workers

Immigrant workers play a critically important role in Iowa’s construction industry and economy, making up 8% of the state’s workforce. While immigrant workers disproportionately fill the most physically demanding and dangerous jobs in Iowa’s construction industry, they experience high levels of violations of wage payment and safety laws.[xxviii] Harmful policies and a failing immigration system make finding jobs — especially good jobs — challenging. Fearing retaliation that frequently includes threats of deportation, many immigrants silently endure wage theft, further deepening economic disparities and racial divisions.[xxix] Common Good Iowa’s 2022 report on wage theft in Iowa found that immigrant workers have 45% higher odds of experiencing minimum wage violations than U.S.-born workers.[xxx]

It is particularly common for immigrant workers to be hired by labor brokers, whose off-the-books approach can provide a sense of security and income when people haven’t received work authorizations.[xxxi] However, this means that immigrant workers are disproportionately harmed by the wage theft, misclassification, and health and safety issues that run rampant under labor brokers.

In the face of abuse, immigrant workers have organized and led numerous worker movements that have raised standards and improved working conditions for all workers.[xxxii] In order to raise standards in the construction industry, it’s critical that state and local policymakers communicate with immigrant-led organizations to understand and address the particular barriers that immigrant workers face to protecting their rights and hold lawbreaking employers accountable.

Low-wage work and poverty in construction

Despite working long hours and providing vital services in a robust economy, many construction workers and their families are financially insecure. This fact raises concerns about the sustainability of the sector’s growth and its ability to recruit and retain the skilled workforce it needs for the ongoing boom in projects.

In Iowa, 17% of construction worker families — almost 1 in 5 — struggled to make ends meet on incomes below 200% of the federal poverty level (FPL).[xxxiii] The median wage for laborers in Iowa — the largest group of workers within the construction sector — stood at $18.48 per hour, or $38,000 a year, in 2021.[xxxiv] Incomes like these often fall short of providing the financial security that workers and their families need just to get by without public supports.[xxxv] 

Nationally, 46.7% of construction trades workers are in low-wage jobs (defined as earning less than two-thirds of the regional median wage),[xxxvi] and many remain so over time, even as they grapple with the responsibility of supporting themselves and their families. This phenomenon is more pronounced among women, people of color, and individuals with lower levels of education.[xxxvii]

Beyond wages, many construction workers are excluded from benefits that help set them up for a healthy, dignified future:

• Absence of health insurance plagues the construction sector; 31% of construction workers lack this essential benefit, compared with just 10% of workers in other industries.[xxxviii]

• Participation in employee-sponsored retirement programs among construction workers is low and has dropped precipitously (standing at 27% in 2015, down from 39% in 2000).[xxxix]

• Families of construction workers are more likely than those of all workers to be enrolled in safety-net programs like Medicaid, CHIP and SNAP — 39% compared with 31% of all workers’ families.[xl] 

If the construction industry in Iowa is to grow and strengthen over the next decade, developers, contractors, and government officials must focus on producing good jobs — jobs that pay well, respect health and safety, protect their employees, and benefit the local community. This is absolutely necessary for ensuring fair growth in the industry, rather than allowing the benefits of investments to go to low-road contractors, corporate executives, and out-of-state businesses. Unfortunately, recent actions by Iowa lawmakers have exacerbated these problems.

Restrictive State Preemptions

In 2017, Iowa lawmakers introduced a series of legislative measures to ban local governments from using several pro-worker, pro-family policy tools.[xli] These preemption laws placed severe restrictions on the capacity of counties and cities to elevate labor standards and improve the well-being of workers through local laws like setting local minimum wages, implementing fair scheduling practices and project labor agreements and establishing paid leave provisions.[xlii] 

Preemption of local labor standards and bidding policies has harmful repercussions for the construction sector and for the state as a whole. These policies, now missing from local government tool belts in Iowa, have proven effective at enhancing conditions for construction workers, guaranteeing equitable wages, and bolstering local employment by prioritizing the hiring of local workers over out-of-state contractors. Not only does Iowa lose out on these benefits that would enhance the entire economy, but communities and contractors across Iowa may be losing access to millions in project funding because of local governments’ inability to implement project labor agreements (PLAs).[xliii] Numerous U.S. Departments encourage bidders for funding opportunities to adopt PLAs, indicating that project bids will be judged more favorably if they do so.[xliv] Without the option to properly enforce labor standards, Iowa cities and counties can fall behind other states that have the competitive edge.

Prevailing Wage Laws

Prevailing wage laws are designed to set minimum compensation requirements on publicly funded projects. They set wages for a specific classification of work in a given geographic area.[xlv] They are intended to assure taxpayer dollars are not used to undermine local labor markets. The case for prevailing wage laws is strongly supported by research. Beyond the benefit to the local workforce, 85% of peer-reviewed studies conducted since 2000 have found that prevailing wage laws have no adverse effect on the cost of traditional public works projects, such as schools and highways.[xlvi] On the other hand, repealing prevailing wage laws does real harm, including reducing wages and benefits for construction workers, increasing on-the-job fatalities, forcing greater reliance on government assistance programs, and decreasing the number of projects completed by local contractors — all without generating savings for taxpayers.[xlvii]

Project Labor Agreements

Project Labor Agreements (PLAs) are pre-hire collective bargaining agreements, forged between construction unions and contractors, that establish terms and conditions of employment for projects. For example, a PLA contains agreements about how much the workers will be paid and what kind of benefits they will receive. PLAs help ensure projects are completed promptly and efficiently, provide access to skilled workers, foster workforce diversity and enhance worker safety.[xlviii]

PLAs standardize working conditions, prioritize safety, promote veteran participation, support apprenticeships, bolster local hiring, and elevate the employment prospects of women and individuals from disadvantaged communities.[xlix] As an added benefit, PLAs can also play a pivotal role in avoiding labor disputes and related project delays by eliminating strikes and lockouts.

Despite clear benefits, Iowa legislators preempted local governments from using PLAs on public projects, pushed by anti-union interests spreading the lie that they increase costs. In reality, the opposite is often true. While PLAs have higher up-front labor costs, they make up for them with greater efficiency and higher-quality work that minimizes the cost of fixing errors. The U.S. Department of Labor explains the extensive benefits of PLAs and provides an example of a PLA for the rehabilitation and renovation of schools leading to $221 million in savings over five years.[l] Previous analysis in Iowa also demonstrated benefits of PLAs used in the state before lawmakers intervened.[li]

 

The Union Difference

Unions stand as a beacon of hope, representing one of the construction industry’s greatest opportunities for healthy growth. Workers represented by unions experience lower rates of wage theft, safer working conditions, and lower gender and racial wage gaps. In 2021, the Economic Policy Institute found that unionized Black workers are paid 13.1% more than their Black peers not represented by a union, and unionized Hispanic workers are paid 18.8% more than their nonunionized peers.[lii] Union workers also are significantly more likely to have good health coverage, paid time off and retirement benefits,[liii] and on average they receive total compensation packages 78% percent higher than non-union construction workers.[liv]

Figure 9. As union membership declines, income inequality increases

U.S. union membership and share of income going to the top 10%, 1917-2019

Unions benefit not only their member workers, but the entire community. They provide safety nets for workers and their families, complete projects more efficiently and accurately, and help balance the power between workers and employers.[lv] The decline in union density is therefore a deeply concerning trend. From a strong 42% in 1971, the rate of union membership in the U.S. construction industry plummeted to a mere 11.2% by 2023.[lvi] This decline has exacerbated wage disparities and weakened the safety nets that unions have historically provided.

Figure 10. Construction union membership down almost half in 7-year anti-union push

Share of Iowa construction workers covered by a union, 5-year rolling average, 1987-2023

In Iowa, union density remains well below the national average at 8.5% in 2023.[lvii] In Oxfam’s “Best States to Work in the US 2024,” Iowa ranked 37th overall and 44th in worker protections out of all 52 states and territories.[lviii] It is unsurprising that both union density and worker protections are low in the state, considering the deep connection between them. On first glance, the picture looks slightly brighter in Iowa’s construction industry, where union density sits at roughly 11.6% in 2023.[lix] But historical data on Iowa’s construction sector show that union density is at its lowest point in recent memory.

Economic conditions and the recent surge in collective worker actions throughout the nation are spurring renewed optimism for labor unions.[lx] In 2022, public approval of labor unions reached 71% — its highest level since the 1960s[lxi] — providing hope that Iowa’s construction workforce will follow national trends and begin an upward climb. Policymakers can respond to public demand by promoting policies that support workers’ right to organize, hold employers accountable who violate these fundamental rights and link public construction funding to compliance with state and federal workers’ rights laws.

 

Federal Investments

Iowa’s construction sector is in a transformative era, thanks to a wave of unprecedented federal investments stemming from the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law (BIL), also known as the Infrastructure Investment and Jobs Act. These substantial investments hold the promise of shaping the construction landscape in Iowa, with massive opportunities for expanded apprenticeships, tax credits and grant funds and local labor incentives.[lxii]  

Figure 11. Inflation Reduction Act provides billions in funding, tied to strong labor standards, for renewable and clean energy projects

Share of federal IRA dollars by priority area

Inflation Reduction Act

The IRA is packed with opportunities for grants, loans and tax credits emphasizing good jobs and a clean environment. In 2023, the Rocky Mountain Institute found that the amount invested in Iowa through the IRA could total $25 billion by 2030 — ranking it 4th highest among all states per capita.[lxiii] The investments, however, are not guaranteed. They can only be accessed if states, local governments, utilities, developers and households take action and use tax credits, grants and loans.

For example, the IRA provided $12.45 billion for the residential energy efficiency tax credit, which gives a 30% tax credit to homeowners for their costs to install high-efficiency cooling, heating, windows and doors, up to a maximum annual credit of $1,200. Homeowners can access this tax credit directly as long as their purchase comes from a list of qualified manufacturers. However, most IRA opportunities are for state and local governments, developers, utilities, and other private companies. The Clean Energy Production Tax Credit was created by the IRA, incentives production of net zero carbon energy, and requires prevailing wages and registered apprenticeships.[lxiv] Dozens more funding opportunities exist for state and local governments, developers, utilities, manufacturing companies, nonprofits and individuals.

Bipartisan Infrastructure Law

The BIL also creates extensive opportunities for the construction industry through its grants, loans, and tax credits. As of August 2023, $3 billion in BIL funding has been allocated for 233 projects in Iowa and more is budgeted to come in over the next several years. Another $3.9 billion is expected to be funneled into Iowa’s highways and bridges over the next five years.[lxv] 

The effects of these investments are already being felt throughout Iowa. The Federal Aviation Administration awarded $20.4 million to the Eastern Iowa Airport for modernization and expansion, allowing them to also increase accessibility. In Northwest Iowa, the Lewis & Clark Rural Water System received $142 million in BIL funds to construct clean drinking water pipes in rural communities.[lxvi] 

Prevailing wage, registered apprenticeships and ‘Buy America’

IRA and BIL funds are, in many cases, attached to certain labor and equity standards. The vast majority of opportunities in both the IRA and BIL require large projects to compensate workers according to local prevailing wages.[lxvii] Under the IRA, some tax credits incentivize the use of registered apprenticeships — these are opportunities for workers to build a career pathway and gain skills while getting paid. This provision promotes a strong flow of skilled labor into the construction industry and increases the diversity of the workforce.[lxviii] In the BIL, many funding opportunities require projects to buy American-made materials or give bonuses to those that do so. The “Buy America” policy is designed to boost the American manufacturing industry and deliver more local jobs.[lxix]

As Iowa enjoys the outlook of a construction renaissance fueled by federal investments in the IRA and BIL, the underground economy of low-road contractors and cheated workers is still thriving and growing. Left unchecked, it will drag down workers, families and communities — especially the most vulnerable — at a time that should be marked by opportunity. Iowa would be wise to embrace the labor standards built into the federal funding streams and commit to and invest in their enforcement throughout the state. This is essential to a promising future for Iowa's construction industry.

Conclusion

The ongoing growth of the construction industry, spurred on by extensive federal investments and incentives, points to a future of many opportunities. However, over a decade of lax labor law enforcement has contributed to a substantial underground economy of labor brokers and illegally misclassified employees. Leading to worker exploitation, unsafe conditions, higher rates of poverty, and huge public costs, this low-road culture poses a threat to the fair and responsible growth of which the industry is capable. On the other hand, we are in a moment of historic opportunity for the state’s construction industry, with an influx of infrastructure work and funding sources tied to creating good jobs. By combining strategies to protect workers through expanded enforcement, give workers a seat at the table, and invest in Iowa’s infrastructure and workforce, we can pave a new high road for the construction industry.

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