Repeal the Prevailing Wage Law


Here's an easy way to cut $250 million from the state budget: repeal the prevailing wage law. ($250 million is equivalent to the amount of revenue generated by increasing the state's personal income tax by .15 percentage points.)

A 2007 report written by Paul Kersey, a senior labor policy analyst at the Mackinac Center for Public Policy, says that the prevailing wage law, enacted in 1965, is estimated to have cost the state $216 million in 2002, while local prevailing wage laws cost another $16 million. (These figures represent $250 million and $19 million in 2007 dollars.) The cost to public school districts was $109 million in 2002, or $126 million in 2007 dollars.

The law applies to construction only, but it applies to all construction employees working on projects paid for by state government:

The statute’s language even covers projects undertaken by local governments that use state financial resources, no matter how small the state’s financial contribution. The vast majority of public school construction is governed by the prevailing wage law, even when all funds are provided by the local school district, because the state often serves as a guarantor for construction bonds issued by school districts.

The required minimum wage varies with the specialty of the construction worker (mason, carpenter, electrician, etc.) and is calculated from collective bargaining agreements submitted by local unions in the county in which the work is being done. The effect of the law is that contractors must pay wages that average 40 percent to 60 percent higher than those found in the marketplace.

In his conclusion to the report, Paul Kersey says:

However well-intentioned Michigan’s prevailing wage law might have been when passed, it now costs taxpayers hundreds of millions of dollars annually while it boosts the pay of higher-wage construction workers and closes opportunities for lower-wage construction workers. In a time of high unemployment and dwindling revenues, this costly law ought not go unchanged.

A lot of people think that contributions to political campaigns from developers Joel Ferguson and Gary Granger were the main reason the Legislature granted them a no-bid contract to build a new State Police headquarters in downtown Lansing. But another reason might be that it will provide high-paying jobs to a lot of union construction workers.

My opinion is that the state should not be concerned with the wage rates paid by contractors. Contracts should be awarded to the lowest qualified bidder.