Prevailing wage law stirs debate

By DAN SMALLWOOD
Capital News Service
 
LANSING – Pay for workers on state-funded projects could drop significantly if legislation introduced in the Senate becomes law.
The GOP proposal would repeal Michigan’s 45-year-old Prevailing Wage Law that mandates construction workers on such projects be paid at prevailing levels.
The lead sponsor, Sen. Arlan Meekhof, R-Olive Township, cited a school construction project in his district as a motivating force behind the legislation.
But proponents of the current law, including union leaders, say prevailing wage is an important safeguard for workers and project quality.
The law requires contractors on projects receiving state funds to pay at least the average wage levels of skilled workers in the fields necessary for the project.
Meekhof said current law meant taxpayers paid far more than they would have for labor costs and too much of a $58 million millage passed by Allendale voters in May of 2007 went to labor costs.
The people “could have gotten a much better price” without the prevailing wage requirement, he said, and “any contractor” in the area could have matched the price the district paid for the project.
In 1994 the prevailing wage law was temporarily repealed due to a court ruling. Before its reinstatement in 1997, a study by the Mackinac Center for Public Policy found the potential savings on labor costs topped 10 percent.
In Ohio, an exemption of public schools from prevailing wage laws allowed that state to save $487.9 million, 10.7 percent of construction spending, according to the Ohio Legislative Service Commission.
Repealing the law, Meekhof said, would remove barriers to state contracts, increase competitiveness and get taxpayers more for their money.
School and university construction projects and many municipal projects fall under the law.
Projects with federal funding fall under the Davis-Bacon Act of 1931, which provides similar protections.
Mark Gaffney, president of the Michigan AFL-CIO, said despite the federal protections, a “very significant amount” of work is covered under state law. He said repealing it would make it easier to give construction jobs to out-of-state firms, calling the proposal “insulting” to Michigan construction workers.
Construction workers, he said, are “easily exploited” because of their field’s temporary nature. Taxpayer-funded jobs must “come back to local firms and local workers at local wage rates.”
Patrick Devlin, treasurer-secretary of the Michigan Building and Construction Trades Council, also said the law should remain unchanged. Far from saving money, repeal would cost the state money in the long term, with less-trained workers lowering the quality of construction.
“Skilled labor doesn’t come cheap and cheap labor doesn’t come skilled,” he said.
Losing prevailing wage, Devlin said, would create an uneven playing field, hurting skilled workers and lowering wages without decreasing costs.
But Paul Kersey, the director of labor policy at the Mackinac Center in Midland, a free market-oriented think tank, called prevailing wage law a “waste of money” that “drives up the cost of construction.”
The law favors unionized workers at a time when they are just over one-fifth of the construction workforce, he said.
Kersey said that the money saved on repeal could keep the state from having to cancel construction projects, something he said is important given the state’s budget crisis.
Meanwhile, in the House, some Democrats want to punish state contractors that repeatedly violate the prevailing wage law or employ undocumented workers. Sponsors include Reps. Tim Melton of Pontiac, Vicki Barnett of Farmington Hills, Jon Switalski of Warren and Jimmy Womac of Detroit.
David Reynolds, professor of labor studies at Wayne State University, called the prevailing wage law “very important,” saying it “guarantees that you have high-quality work” on state-funded projects, keeping construction at “union-quality” levels and making contractors hire “highly trained workers.”
The price of labor, he said, “reflects paying for that high level of training.”
Meekhof disagreed, saying state projects already require a standard that any contractor would have to meet.
Even if workers receive a lower wage, he said those standards would maintain current quality.
However, several studies, including one by an economist at the University of Utah, suggest that repealing such laws doesn’t lower construction costs.
And Wayne State’s Reynolds said the cost of wages must be distinguished from overall project costs. While workers might receive more an hour, those same workers are often better trained and work faster and better.
“What are the ultimate hidden costs?” he asked, adding that the adage “you get what you pay for” applies.
Meekhof, however, insisted he doesn’t look at it as a wage issue, but about “peace of mind” for taxpayers by ensuring the state gets the most for their money.
And the Mackinac Center’s Kersey said the state should “let the taxpayers benefit” from the full scope of the private construction market, insisting that quality wouldn’t decline.
The legislation is pending in the Senate Economic Development Committee. Co-sponsors include Dave Hildenbrand, R-Grand Rapids; Jack Brandenburg, R-Harrison Township; Howard Walker, R-Traverse City and Tonya Schuitmaker, R-Lawton.
© 2011, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.