Keystone Research Center and Affiliated Researchers Find Out-of-State Subcontractor Employed NO PA Residents So Jobs and Economic Activity Leaked Heavily to Other States
Pittsburgh, PA: Over the next five years, Pennsylvania will roll out an estimated $36.8 billion in state and federal transportation infrastructure with additional federal investments in climate infrastructure and U.S. manufacturing. Maximizing the benefits of these investments for Pennsylvania’s communities will require strong labor and local hiring standards, leading to good jobs for highly skilled construction workers in Pennsylvania.
A new report from Keystone Research Center and the Illinois Economic Policy Institute shows what can go awry without local hiring requirements. On the Pennsylvania Department of Transportation (PennDOT) Andy Warhol Bridge project in Pittsburgh, which started in 2016, the winning bidder subcontracted $9 million in painting work to a Florida-based contractor that brought in an entirely out-of-state workforce.
“Using an out-of-state contractor initially appeared pennywise but proved to be pound-foolish,” said report coauthor Frank Manzo IV, the executive director of the Illinois Economic Policy Institute. “That choice had real consequences, costing good jobs for Pennsylvania communities, less business for Pennsylvania companies, and lost revenue for Pennsylvania taxpayers.” More specifically, as a result of contracting with Florida-based Southern Road & Bridge, LLC:
- Pennsylvania lost 59 jobs. Half of 59 workers on the project reported a Florida or Louisiana address. Not a single painter reported a Pennsylvania home residence.
- Pennsylvania companies lost $1.4 million in business sales because out-of-state workers spend more in their home state.
- Pennsylvania received $88,000 less in state and local taxes.
- Workers contributed $31,000 less towards local apprenticeship training funds than with a local workforce.
- Cost overruns of $622,000 on the painting subcontract exceeded by 11 times the anticipated savings of $56,000 from selecting the bid that included a painting subcontractor from Florida.
- There were also reports of worker misclassification, wage theft, and payroll fraud on the project.
Researchers highlight that out-of-state contractors do not invest in workforce development in Pennsylvania. By contrast, when local contractors build infrastructure projects in their communities they contribute to local apprenticeship training programs—ensuring the next generation of skilled tradespeople is trained and helping to combat labor shortages across the state.
“It’s just common sense,” said PA Sen. Devlin J. Robinson (R-37). “We need to take care of our own. When jobs go to local workers that also leads to reinvestment in great apprenticeship programs like the Painters Union’s Finishing Trades Institute in my district.”
“There’s another major reason that we need local and Pennsylvania hire provisions,” said Angela Ferritto, president of the PA AFL-CIO. “Pennsylvania construction worker[s] operate more safely than out-of-state workers.” The new report shows that Pennsylvania construction sites industrywide have 32% fewer health and safety violations per inspection than the national average, and unionized ones have two-thirds fewer health and safety violations than the national average. About 1,000 U.S. construction workers die in fatal accidents each year.
Given the scale of federal investment over the next several years, Pennsylvania can’t repeat its mistake with the painting portion of the Andy Warhol Bridge project. Just the $36.8 billion in transportation and infrastructure investment anticipated by 2027 will create an estimated 46,000 jobs annually over five years and grow state and local tax revenues by $2.3 billion over five years. These estimates do not take into account climate infrastructure investments from the Inflation Reduction Act and manufacturing investments from the CHIPS+ Act.
“We have a bipartisan consensus that local hire makes sense for Pennsylvania,” said Representative Nick Pisciottano (D-38). “I look forward to joining with my colleagues in the Pennsylvania House and Senate to make sure that we don’t get a repeat of the mistakes on the Andy Warhol Bridge. We must make sure all federal and state infrastructure, transportation, and climate investments create good jobs for workers, demand for local businesses, and taxes for our localities and the state.”
Report Presentation slides can be found, here. Video of the event is here.
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