Senate panel OKs bills to repeal prevailing wage laws

Gary Heinlein
The Detroit News

Lansing — A Senate committee approved legislation to repeal Michigan’s prevailing wage laws Wednesday, sending it to the full Senate in a bid to save money for taxpayers.

Senate Majority Leader Arlan Meekhof said prevailing wage requirements inflate public construction project wages by as much as 60 percent and add 10 percent or more to overall project costs. The 50-year-old law requires public projects contractors to pay workers the “prevailing” or union wage scale.

“I don’t think taxpayers should have to pay more for their buildings than private industry does,” said Meekhof, the West Olive Republican sponsor of one of the three bills.

The Senate leader and House Speaker Kevin Cotter, R-Mount Pleasant, are making the repeal legislation a major priority, although Republican Gov. Rick Snyder says he doesn’t favor it.

The legislation was sent to the full Senate by its Michigan Competitiveness Committee on 4-1 votes following a hearing that lasted about one-and-a-half hours. Speakers’ presentations were timed by a four-minute clock.

Lone committee Democrat Rebekah Warren of Ann Arbor questioned why such sweeping legislation was being rushed, but Committee Chairman Mike Shirkey, R-Clark Lake, said positions on the issue are hardened.

Further hearings and testimony “is likely to not change too many people’s minds,” Shirkey said.

Opponents, including the Michigan Infrastructure and Transportation Association, said the prevailing wage law levels the playing field on publicly-funded projects, supports skilled trades training and upholds middle-class wages.

MITA Executive Vice President Mike Nystrom said his organization’s board voted unanimously to oppose repeal of the law even though 65 percent of its member businesses are non-union construction firms.

Requiring a prevailing wage prevents unscrupulous companies from using low-paid employees to undercut contractors that employ skilled trades workers to assure high-quality results, he and others said.

Impact of repeal bills

Advocacy for the change is being framed as a way to cut the costs of school and government construction projects.

Repeal of the state law, however, would have little impact on road construction costs. Most road and bridge projects receive part of their funding from the federal government, whose Davis-Bacon Act requires prevailing wages.

The full Senate could vote as early as Thursday on the repeal, said Majority Floor Leader Mike Kowall, R-White Lake. Cotter said last week he favors repeal even though it wouldn’t save much on road projects.

Backers of the repeal include the Michigan Chamber of Commerce and Associated Builders and Contractors of Michigan. Opponents include construction unions and Barton Malow Corp., a major contractor in school construction in Michigan.

Six states have prevailing wage laws similar to Michigan’s, and 17 states don’t have them. The rest of the states have varying forms of prevailing wage laws.

Arguments about whether a repeal would save or lose money are hotly disputed.

Proponents cited a 2013 study by the Anderson Economic Group of East Lansing that concluded prevailing wage mandates cost taxpayers and schools an extra $224 million a year. An Ohio report says repeal of its prevailing wage law for school projects has saved $487 million since 2012.

Warren countered by saying “upwards of 30 of the most prominent economists in the country” have refuted those studies and dispute whether prevailing wage laws increase construction costs at all.

Wage puts Mich. at disadvantage

But Associated Builders and Contractors of Michigan President Chris Fisher said Michigan’s Prevailing Wage Act “places our state at a competitive disadvantage with the rest of the country.”

Fisher, who said his group of 1,000 businesses is 80 percent non-union, added that the private sector has rejected prevailing wages on its projects.

“Most local governments do not have them either,” he said. “Accordingly, prevailing wage repeal simply means that state-financed construction will better reflect the overwhelmingly typical contracting practices seen throughout the greater construction industry in our state.”

James Judd, operations manager of Master Craft Carpet Service in Redford, said his company is the leading flooring installation contractor in the country and urged lawmakers not to repeal prevailing wage requirements.

“The best way to ensure competition in the construction industry is through the prevailing wage laws,” Judd said. “Michigan’s prevailing wage law prevents dishonest and often out-of-state contractors from taking our tax dollars, underbidding Michigan contractors and paying-out-of-state workers, sometimes, under the table to avoid paying taxes.”

Michigan Building and Trades Council legislative director Patrick “Shorty” Gleason said the plan is “a slap in the face” for Michigan workers.

“To say that those in favor of repealing prevailing wage are dangerously naive about the construction trade is a major understatement,” he said. “It’s irresponsible for Michigan’s leaders to consider the creation of an environment that incentivizes less training; less safety; less health care; less retirement care; and less interest in the skilled trades as a career choice.”

Michigan’s prevailing wage law was suspended between 1994 and 1997 under a court ruling. A 2009 report by the free-market Mackinac Center for Public Policy said 11,000 construction jobs were created during the period.

But Mike Stobak, vice president of Barton Malow’s education construction group, said the fallout from the suspension was a reduction in competitive bidders on public projects, a decline in the trained workforce and a reduction in construction quality leading to more lawsuits.

While there were some initial savings, Stobak said, they didn’t last and project costs soon increased.

“I don’t want to live through that again,” he said.