Guest Column

Prevailing wage repeal: another step toward stable state economy

September 20, 2013
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Gov. Rick Snyder and the Michigan Legislature have done much to improve Michigan’s business climate in recent years. However, one archaic, nonsensical law remains on the books, and it costs taxpayers money every year.

Michigan needs to keep job numbers growing, but the state’s outdated prevailing wage law is holding the construction industry back. The law forces construction companies to pay artificially high wages to workers on state-financed or state-sponsored construction projects, which in turn raises the total cost for taxpayers footing the bill.

It’s a huge price tag for a major sector of the economy that’s still recovering, and it’s helping to drain the budgets of cash-strapped school districts and other governmental units. 

We now have a simpler, fairer tax system and a more streamlined regulatory process, helping Michigan’s employers focus on what they do best — growing their businesses and creating jobs. Prevailing wage, however, which requires that workers on taxpayer-funded construction projects receive the “prevailing wage” for the area in which the project is located, results in unnecessary, wasteful spending at a time when local units of government are trying to stretch and manage their dwindling financial resources as best as they can.  

It’s an unfair law that has been entrenched on the books since 1965. Michigan lawmakers need to continue their bold march toward reshaping the state’s business climate by repealing the law. Legislation introduced earlier this year in both the House and Senate would eliminate the law and allow the construction industry to set competitive, market-based wages, instead of those established by the increasingly small union segment of the work force. 

The bills are based on common sense and fairness. Businesses in every other sector of Michigan’s economy are allowed to compete for the best workers by paying them competitive wages — not those mandated by capricious public policy.

The law’s name couldn’t be more misleading. There’s nothing “prevailing” about the wage rates the law dictates. Rather, they’re based on union wage classifications and work rules, despite the fact that roughly 80 percent of Michigan’s construction work force does not belong to a union.

Michigan’s construction firms are already doing well by workers, paying them an average free-market wage of $23 an hour, which is significantly more than the average paid for all industries.

No other industry is subjected to the type of red tape required by prevailing wage. The law is a regulatory nightmare that greatly increases construction firms’ paperwork expenses. Each geographic area has different wage rates, and they often change quarterly.

Construction companies also must monitor the classification under which each worker is paid. Considering that workers could perform several tasks each day, each requiring a different pay rate, it’s easy to see how the red tape — and monitoring expenses — can quickly pile up.

Imagine if all businesses in Michigan had to operate under similar rules as those imposed by the prevailing wage law. The result would be job-killing inefficiency on a massive scale. 

Forty-three other states have no prevailing wage mandate, or they at least calculate wage rates based on an accurate sampling of all construction wages.  

Michigan has taken remarkable strides in remaking itself so that it can better compete economically on a national scale. Lawmakers can continue the momentum by repealing the state’s wasteful, job-killing prevailing wage law.

Chris Fisher is president of Associated Builders and Contractors of Michigan, a statewide trade association representing the commercial and industrial construction industries, dedicated to open competition, equal opportunity and accountability in publicly funded construction projects.

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