Prevailing wage law should be repealed
A new effort has been launched in the Legislature to repeal the economically crippling prevailing wage law. Led by Senate Majority Leader Arlan Meekhof, R-West Olive, the three-bill package should be passed so that Michigan can get rid of the archaic law, which has been in effect since 1965.
Prevailing wage requirements create artificially high costs for building schools and government facilities and work against job creation. It mandates that such public projects pay non-union workers the same wages bargained by union workers in an area.
A study by the Anderson Economic Group found that from 2002 to 2012 the act cost Michigan taxpayers an average $224 million per year on construction projects for K-12 districts, community colleges and public universities. The almost one-quarter of a billion dollars that was overspent annually could have built more than 315 schools, notes Chris Fisher, president and CEO of Associated Builders and Contractors of Michigan, Lansing.
The prevailing wage is based exclusively on collective bargaining agreements that cover just 19 percent of the state workforce but are imposed on 100 percent of construction workers on public projects.
Without counting prevailing wage projects, the average salary of construction workers is $47,000 a year, which is higher than all state industries. Yet, the prevailing wage can double the cost of a project.
“Any time you have a $40,000 or $50,000 job in the private sector and suddenly it becomes a $100,000 job in the public sector, that should be raising red flags,” Fisher says.
Existing wage regulations are a construction company’s red tape nightmare. Builders must monitor more than 350,000 different wage classifications. That’s more than the total number of construction workers in Michigan.
Fisher concedes that one of the biggest road blocks to abolishing the law is Gov. Rick Snyder, who has said he opposes repeal of the regulation. Snyder, who has pushed the skilled trades in recent years, has indicated he thinks overturning the prevailing wage could deter people from pursuing careers in these fields.
But Fisher hopes to at least start a discussion about the regulation that could change the governor’s mind.
While the state has made impressive economic strides under Snyder, it still has a ways to go to become one of the top-10 competitive job states.
The harm this law does was aptly illustrated in the 1990s, when the prevailing wage law was suspended for 30 months — from December 1994 to June 1997 — because of a federal district court ruling. During that time, the U.S. Department of Labor reports 11,000 Michigan construction jobs were created.
Michigan is just one of six states that has a prevailing wage law. The other 44 have abolished or significantly amended it.
Also, although fewer people are moving out of Michigan, a recent study showed that more people were still leaving than coming in. Lawmakers need to continue to work to make the state more business friendly, ultimately attracting more companies and creating more jobs. Michigan needs to become a destination for job seekers.
Repealing the prevailing wage law would be a major step in that direction.