CalPERS investment committee approves market study on prevailing wages and labor peace agreements

The CalPERS Investment Committee on May 8 approved a staff proposal to commission an external market study to quantify the financial impact of prevailing wage requirements and labor peace agreements on real estate and infrastructure investments.

The committee approved a motion, moved by Director Jose Luis Pacheco and seconded by President Theresa Taylor, that authorizes staff to proceed with an RFP and contracting process to engage third-party consultants or academic institutions to produce the study. The vote was unanimous.

Staff presenters said the study would use mixed methods — econometric analysis, case studies, manager and stakeholder interviews, and review of public data — to estimate effects on project costs, schedules, risk and returns. Tamara Sells, associate investment manager of sustainable investments, said the estimated study cost is about $1,000,000 (approximate) and the timeline is 18 to 24 months.

Committee members pressed for refinements to increase the study’s usefulness. Director Melissa Willette asked that “skilled labor” be analyzed as a distinct factor because apprenticeship and training requirements can raise upfront wage costs while potentially improving build quality and reducing long‑term maintenance and delay risk. President Theresa Taylor and others asked staff to ensure that labor organizations and rank‑and‑file workers are included in interviews and surveys rather than limiting outreach to union leadership.

Several trustees urged focusing the main empirical work on California, where prevailing‑wage rules and publicly available wage determinations are most established and where a significant share of CalPERS real‑asset exposure resides. Trustees Robert Carlin and others recommended keeping the RFP open to bidders proposing broader, multi‑state analyses as long as the proposal includes a strong California effort.

General Counsel Matt Jacobs advised that a formal record and rigorous methodology are important to satisfy fiduciary duties if the board later takes policy actions tied to the study’s findings. Staff committed to regular updates to the committee during the study and to include trustees in the RFP review process.

Next steps: with committee direction incorporated, staff will submit an RFP to the procurement queue and manage third‑party contracting and oversight; the study will return findings to the committee and board when complete.

Ending: Trustees emphasized the dual aims of the work — producing defensible empirical evidence to support fiduciary decisions while ensuring labor’s voices and California specifics are adequately represented in the research.