Agenda - Council Work Session - 07/28/2026

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In 2025, public sector construction in the United States was a little more than $517 billion, according to the Federal Reserve Bank of St. Louis. Why that matters for public officials is the fact that most of this funding was required to be awarded to the lowest bidder. Low bid requirements certainly play a role in helping contain costs on public projects, but they have the unintentional side effect of incentivizing contractors to seek any advantage that will increase their odds of submitting the winning low bid. And unfortunately, more than a century of hard experience has taught us that some contractors will choose to employ schemes like misclassification, payroll fraud, and wage theft in order to increase their chances of winning low bids. And research backs this up, showing how prevalent these issues have become within the construction industry: 23% of Minnesota construction workers experience wage theft, reducing their wages and benefits by 36% on average.' This reduces state tax revenues from the construction industry by about $136 million each year ($65 million in income taxes, $13 million in unemployment insurance contributions, and $58 million in workers' compensation premiums). Across all industries, 316,000 Minnesota workers are victims of wage theft each year, losing about $6.2 billion. This also deprives government entities of about $1.3 billion in tax revenue annually, putting more strain on crucial public safety net programs like Social Security, Medicare/Medicaid, unemployment insurance, and workers' compensation. [I grabbed these figures from Aaron's presentation — can we add citations for these figures?] 1 Goodell, N., & Manzo IV, F. (2021). The Costs of Wage Theft and Payroll Fraud in the Construction Industries of Wisconsin, Minnesota, and Illinois. Midwest Economic Policy Institute. httns: //dwd.wi.gov/misclass-taskforce /ndf/meetings /210114 /costs-of-navroll-fraud.ndf