States should know prevailing wage laws benefit unions, not workers
President Biden isn’t the only politician ignoring legislators and issuing unilateral mandates these days. So are governors nationwide — including my home state governor, Gretchen Whitmer. At the height of the pandemic, she went around the state legislature to declare an endless emergency, receiving a rebuke from the state Supreme Court. Now she’s undermining democracy by reinstating a pro-union policy that the state legislature previously repealed.
Whitmer’s latest unilateral act mandates that all state contractors pay a “prevailing wage” — a wage rate essentially set by union leaders. Putting aside the supreme importance of passing policies through the legislature, which the governor apparently refuses to do, this policy is harmful for several reasons. First, it forces non-union companies to adopt union rules, hurting their competitiveness for contracts. Second, it leads to spiraling costs on government construction projects, hitting taxpayers hard.
That’s why the state legislature repealed the old prevailing wage. The Mackinac Center found that this mandate would have cost Michigan’s taxpayers at least $500 million annually — and likely much more. Since the prevailing wage was repealed in 2018, taxpayers have saved well over a billion dollars, while businesses have had to compete for contracts based on quality and cost — not arbitrary union pay rates. Both things are good for the Great Lakes State.
Gov. Whitmer’s unilateral action undoes these benefits. Yet she’s also hurting the very people she purports to help: Michigan workers.
Other states prove that the prevailing wage holds workers back. Take Indiana, which ended this policy in 2015. Dr. Michael Thom of the University of South California found that construction workers consistently have seen higher earnings since the law was repealed. Prevailing wage only benefited a limited number of union workers, and once it ended, all construction workers saw wage gains from the resulting competition.
Thom also found that the number of construction jobs soared following repeal. Between 2012 and 2015, construction jobs in Indiana grew by only 5.8 percent. From 2016 through 2019, jobs in that same industry grew by 14.8 percent — a nearly twofold increase. Indiana also had the highest growth in public works construction employment in the Midwest after the prevailing wage disappeared.
Michigan has seen similar results. Since the 2018 repeal, we’ve had an increase in the growth rate for construction employment in public works. The Federal Reserve Bank of St. Louis also shows that, apart from a pandemic-related dip last year, construction salaries consistently have grown in Michigan since 2018. Workers won as soon as prevailing wage disappeared.
Other states have recognized the downsides of prevailing wage, as well. Twenty-four states, or roughly half of the country, no longer require prevailing wage for state projects. The emerging trend seems to be a growth in states repealing prevailing wage. In addition to Michigan and Indiana, Kentucky and West Virginia have both repealed their prevailing wage laws in the past five years.
Even unions themselves tacitly admit that prevailing wage is a damaging policy. The United Auto Workers (UAW) used nonunion labor when constructing a retirement cottage for its former president, Dennis Williams. That makes sense: When the UAW put the contract out for bid, it received two bids from union firms at a cost of $851,000 and $1.3 million. It balked at such prices, instead choosing cheaper, nonunion firms and saving hundreds of thousands of dollars.
These facts haven’t stopped unions from demanding that prevailing wage be reinstated, and in Michigan, Gov. Whitmer has given them what they want. It’s bad enough that she brought back a policy that has proven to hurt taxpayers and hold back worker pay and job growth. It’s even worse that she did so by going around the legislature.
The people, through their elected representatives, have a right to decide the policies that affect them. The prevailing wage may be coming back to Michigan, but only because our governor decided that one-person rule should prevail over democracy.
Steve Delie is the director of labor policy at the Mackinac Center for Public Policy in Midland, Mich.
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