Prevailing wage laws will ultimately prevail
Less than two weeks ago, Michigan became the sixth state since 2015 to repeal its prevailing wage law — a law that uses market surveys to establish local minimum wage rates for different types of skilled construction work on projects funded by the state or a local government.
In case you think Michigan’s action is part of a homegrown grassroots movement aimed at better economic outcomes, it’s not. It is a coordinated effort, funded by billionaires bent on rigging public bidding in favor of less qualified contractors and low-skilled workers from out of state or outside the country.
That’s why Michigan’s Republican Governor Rick Snyder opposed repeal. It’s why repeal proponents failed in a prior attempt to generate enough signatures to bypass the governor and put the question directly before Michigan voters.
And it’s why this latest effort was clouded by well-documented allegations of deception on the part of paid signature-gatherers.
Ultimately, repeal of Michigan’s prevailing wage law will not save money but will cut wages for middle-class construction workers, shrink the economy and accelerate a growing skilled-labor shortage that will undermine any effort to rebuild our critical infrastructure.
In other words, Michigan politicians that campaigned alongside President Trump’s pledge to lift wages in 2016 just broke a core promise that fueled his election. And they may have to answer for that in November.
The fact is that labor represents just 23 percent of the total cost of the average public construction project — a historically small and declining share.
Over 70 percent of peer-reviewed studies laws since 2000 have concluded that prevailing wage laws have no impact on public construction costs and no effect on bid competition between union and non-union firms.
Studies also unambiguously reveal the benefits of prevailing wage. These include higher productivity, less waste, lower employee turnover, fewer safety problems, less reliance on safety net programs, more local hiring and significantly stronger local economies, to name just a few.
And actual economic data shows the costs of repeal.
For example, Indiana repealed its prevailing wage law in 2015. A few months ago, the first study analyzing the impact of the change revealed:
- Wages dropped 8.5 percent compared to neighboring states with strong prevailing wage laws. Income inequality soared, with wages for the lowest-paid construction jobs dropping 15 percent.
- Wage cuts disproportionately hurt veterans, who work in construction at higher rates than non-veterans.
- Productivity dropped by 5 percent as the share of workers without a high-school diploma or equivalent grew by 4.5 percent.
- Employee turnover grew and heavy construction job growth lagged neighboring states with strong prevailing wage laws.
- An analysis of hundreds of school construction projects both before and after repeal revealed no change in bid competition, the union share of the construction market or project costs.
But don’t take my word for it. The assistant Republican majority leader of the Indiana House recently said, “It hasn’t saved a penny.” As a result, a growing number of Indiana newspapers have now publicly called for the legislature to consider reinstating the state’s prevailing wage.
In time, I have no doubt the same will happen in Michigan, Wisconsin, West Virginia and other states that have bought into the mathematically impossible arguments of repeal proponents.
In fact, some of them are already backtracking because they know that if cutting middle-class wages and driving skilled tradespeople away from the critical work of rebuilding our infrastructure were the solution to America’s problems, we wouldn’t have so many.
Frank Manzo IV is the policy director of the Illinois Economic Policy Institute and the Midwest Economic Policy Institute. He has authored or co-authored more than 30 studies on the impact of the federal Davis-Bacon Act and state prevailing wage laws. Learn more at www.midwestepi.org or www.illinoisepi.org.