Posted on 01/12/2016 6:54:55 AM PST by MichCapCon
In Michigan, government entities, such as school districts, must pay all contractors union wages for construction projects — the so-called prevailing wage. This wage rate is established by the state and is based on wages collectively bargained for by unions in the region where the construction work is being done. Market wages set by open competition are explicitly forbidden. The law was first enacted in 1965 when a much larger portion of Michigan’s construction force was unionized, but today, in the construction industry, only one-fifth of workers belong to labor unions.
In other words, when companies bid on government construction jobs, a one-fifth minority now effectively sets the wages for the entire industry. It may have been plausible to argue these wages were “prevailing†many decades ago, but today, the law’s title is nothing short of a misnomer. In fact, only six states still set state construction wages in such a manner. It is time for this archaic law to go.
Basic economics predicts the consequences of such a law. A market’s pricing mechanism reveals relative scarcity and sends pricing signals via supply and demand, promoting the most efficient allocation of resources. Price- and wage-control laws prevent such equilibria by imposing an artificial ceiling or floor, resulting in deadweight loss. A 2015 study by the Anderson Group estimates that, from 2003 to 2012, an average of $127 million per year, or $1.3 billion total, was added to education-related construction costs.
Some argue, however, that government-determined wages are necessary to address social ills. But this argument doesn’t bode so well when it comes to Michigan’s prevailing wage law. Average construction wages are nearly triple the minimum wage — prevailing wage only pads the pay of already relatively well-paid employees, all at taxpayers’ expense.
According to a 2007 Mackinac Center study, the law artificially inflated construction wages by an average of 40-60 percent above market wages, increasing overall project costs by 10-15 percent. For example, in the Detroit metro area, the going market wage for electricians in 2005 was $30.83 per hour. However, when electricians were hired by a public school district in 2005, Michigan’s prevailing wage law forced districts to pay all electricians $46.88 per hour — a 52.1 percent wage inflation.
Higher prices tend to reduce demand. Michigan’s prevailing wage law, therefore, results in fewer overall construction jobs. Since government entities are forced to pay union wages for all construction work, firms that employ higher-wage workers are given an advantage. The result is a disadvantage for lower-wage workers, which places labor unions in a desirable position. Labor unions passionately defend this law, as it effectively forces taxpayers to subsidize inflated wages while protecting their members from fair market competition.
Fortunately, Michigan lawmakers are interested in repealing this law. Rep. Amanda Price introduced House Bill 4001 in January to repeal the law, and the Senate passed Sen. David Robertson’s similar proposal, Senate Bill 3. However, because unions receive a concentrated benefit from the law, they join together to lobby hard against it. And Michigan’s Republican Gov. Rick Snyder also vowed to veto any attempt to repeal the law, honoring a deal made with state Democrats for supporting the failed road-funding plan, Proposal 1.
But there’s additional action on this front, led by taxpayers themselves. A coalition organized to repeal the state’s prevailing wage law submitted petitions with more than 390,000 taxpayer signatures; however, the coalition quickly retracted the petition after learning a hired contractor had duplicated signatures. A new effort is now prepped to launch. If 252,523 validated signatures are submitted by June 1, 2016, the law’s fate will be decided by voters in a Nov. 2016 ballot proposal. If voters approve, the repeal can pass without the governor’s signature.
However well-intentioned Michigan’s prevailing wage law might have been when passed in the 1960s, there’s little case to be made for it today. It is now costing taxpayers hundreds of millions of dollars annually — and is certainly no longer representative of prevailing construction wages. Michigan is one of six states left in the nation to hold onto a similar law. As the state tries to address its fiscal woes and infrastructure, the opportunity cost of allowing this costly law to remain on the books is simply too great.
I’m currently working on a state prevailing wage project. What I’ve seen on this job and others since 1976 is that crafts travel for the highest pay. On the project in WV we have workers from Fl, Va and WI that are here for the money. While most of the workers are from the state, the other needed skills are from outside the state.
As long as construction is in the doldrums, workers will take the lower paying jobs. When construction booms, they travel for higher pay even if they have to leave home for extended periods. On some level they understand they’re selling chunks of their lives. They’ll always try to maximize the price.
The other issues is location. In an isolated location even prevailing/unions rates may not be enough to get the number of workers needed to complete a project on schedule. I’ve been on a prevailing project that went well over the end date because the number of electricians was insufficient to get the work done on time.
Eliminate the prevailing wage and you run the risk of getting even less workers for a remote project.
Unions are not useful anymore.
Yes. Scrap Prevailing Wage.
We can no longer afford to fix our infrastructure at these ridiculous rates.
Example
for vacuuming a floor $45.93 an hrhttp://unionwatch.org/californias-prevailing-wage-floor-vacuuming-at-45-93hour/?utm_source=google&utm_medium=cpc&utm_content=prevailing%20wage&utm_campaign=Google%20Grants&gclid=Cj0KEQiA5dK0BRCr49qDzILe74UBEiQA_6gA-jDBrA4bUE3RYHQt131G3ckh4xvAXIFxNK7obu9FA3kaAiSL8P8HAQ
Another example
A fork lift operator doing a job in Los Angeles makes over $58 an hour.
Michiganders better take their heads out of their collective butts before Unions and public employees bankrupt the state... Again
Well I can see where your bread is buttered. This isn’t an issue with workers taking low-paying jobs because construction is in the doldrums.. It’s a complaint that government is forced to pay 50% more than it should for government projects, because of the prevailing wage rules.
And how often are there issues with remote projects? Remote projects don’t even occur nearly as often as most city-work.
I don’t disagree there may e savings. This is a current issue in WV. You may want to search for some of the current articles. The state legislature changed the way the wage rates are set. At this point the 50% savings is still nebulous.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.