In a move that will reduce the cost of government construction projects, the state of Michigan is repealing its prevailing-wage law.
The Michigan Legislature decided on June 5 to approve Legislative Initiative Petition 2, a proposal to rescind the state’s prevailing wage law, which sets artificially high wages for workers on government projects, after the ballot initiative campaign submitted 268,403 valid signatures.
After a sufficient number of signatures for a ballot initiative are submitted, the legislature has 40 days to enact the proposal or reject it and place the question before the voters.
The decision does not require Gov. Rick Snyder’s approval and cannot be vetoed.
‘No Productive Function’
Matthew Glans, a senior policy analyst for The Heartland Institute, which publishes Budget & Tax News, says prevailing-wage laws increase the cost of government works projects without providing benefits to taxpayers.
“Prevailing wage laws establish labor costs with no consideration for the exact type of work or the skill of the employees,” Glans said. “They serve no productive function in government contracting, but rather encourage more waste and cronyism.”
State Sen. Tonya Schuitmaker (R–Lawton) says Michigan’s prevailing-wage law required the state to consume resources that could been used on other government functions.
“It was costing Michigan taxpayers huge amounts of money,” Schuitmaker said. “Estimates from the Senate caucus were that it was costing $2.24 billion over the last decade. That’s money that could have built over 317 new elementary schools. Construction costs were inflated and running 10 to 15 percent higher than usual. It doesn’t make any sense to build a building in the private sector for $1 million and then have that same building cost 15 percent more because it’s a government building.
“In my opinion, that money could be better used to pave roads, build school buildings, and get money into the classrooms at lower cost,” Schuitmaker said.
‘More Opportunities’ for Workers
Jarrett Skorup, director of marketing and communications at the Mackinac Center for Public Policy, says repealing the prevailing wage will promote prosperity for construction workers.
“For new skilled laborers, there will be more opportunities and better growth,” Skorup said. “Because Michigan’s economy is so desperate for jobs and workers right now, it’s probably not going to have a large impact on wages. The unions should make their argument that they have better service and better products, like everybody in the private sector has to do.”
Schuitmaker says the prevailing-wage law benefitted government contractors and their workers while adding to the taxpayers’ burden.
“Obviously, if you got more money for a construction project, you did better,” Schuitmaker said. “I don’t agree with that. There’s no justification to pay more, and the law acted as a ‘hyper-minimum wage’ for state-funded projects. The prevailing wage was in no way protecting taxpayers.”
Looking to the Future
Glans says what happened in neighboring Ohio shows Michigan’s taxpayers will benefit greatly from the prevailing-wage reform.
“Since the Ohio General Assembly exempted school construction projects from the state’s prevailing wage law in 1998, construction costs imposed on taxpayers have been greatly reduced,” Glans said. “In 2002, the Ohio Legislative Service Commission examined the effects of this change and found exempting Ohio schools from the prevailing wage law saved the government $487.9 million over a four-year period, from 1998 to 2002.”
‘We’ve Done a Lot’
Schuitmaker says Michigan lawmakers have made many pro-growth reforms over the past eight years.
“Michigan has come a long way,” Schuitmaker said. “We’ve passed right-to-work, we’ve passed prevailing wage repeal, and we are putting more accountability with work requirements of Medicaid. We’ve done a lot in the past eight years.”