Prevailing Wage Legislation Does it

matter?
by William Keith, Vice-Chair Policy & Resolutions
Houghton County Democratic Party
If you think that Michigan ought to pay the people who build our buildings and repair our
infrastructure a fair wage for work done right the first time, then you'll be concerned about
the possible repeal of the prevailing wage law, that helps ensure just that. Michigan's
prevailing wage law has stood the test of fifty years under Democratic and Republican state
governments alike, because everyone knows that cut-rate wages buy cut-rate work.
Now, though, cutting workers' wages has become part of the new economy. Companies have
gathered signatures on a petition asking Michigan's legislature to let their contractors get
squeezed, claiming that the move will save Michigan money. But repealing prevailing wage
hasn't reduced expenses in other states: the plan is just to pocket the difference when workers get
paid less.
At the Houghton County Dems' business meeting on October 7th, we passed a resolution stating
our support for Michigan's prevailing wage law. You can read it below, along with some further
details and links to more information.
You may wonder if there is anything you can do right now. There is: if you really want to
repair Michigan's budget, corporations that have received huge tax breaks in recent years can
start paying their fair share again. You can sign a counter-petition at fairfix.org which uses the
same process to call for increasing Michigan's corporate income tax.
Check out the information below, join the discussion, and head to fairfix.org to sign the petition
there. And if the prevailing wage repeal comes before the voters next November, join the
Houghton County Democratic Party in making sure that Michigan continues to pay skilled
laborers a fair wage for work done right.
----Background:

What is prevailing wage?

Passed as Act 166 in 1965, Michigan's prevailing wage law requires that state projects pay
wages to construction, mechanical laborers, and other trades which are similar to those
negotiated by unions or other worker organizations in the area -- either the locality, or the state as
a whole. A bid which includes lower wages is not a legal bid for the job.

Why is it important?
Without this requirement, the lowest bidder would typically be someone paying low wages to
their workers. This:

Impoverishes the community those workers come from;

Weakens Michigan's control of its wage and labor laws by forcing local companies to
compete with national companies subject to other states' wage and labor laws; and

Practically ensures that the project is not done by senior, higher-skilled workers.

This latter leads to poor-quality work, and consequently:

Differences in wage costs are largely absorbed by materials and service costs -- in other
words, better workers need less help and do the job with less waste. The productivity
difference can be as high as 13%. The net extra costs are collected as profit by the
companies involved in providing the materials and services. [4]

Worker injuries increase after prevailing wage repeal -- as much as 15% in Utah. [3]

The resulting work may need to be redone or repaired; this was an issue with Michigan's
previous brief suspension of prevailing wage laws in the 1990s. [5]

The argument in favor of repealing the prevailing wage is that it saves the
state money. Does it?
No.

State contracting costs drop very little or not at all after prevailing wage repeals. [1,2,6]

The economic effects of prevailing wage repeal also cost the state money: one study [4]
suggests a loss to Michigan of "11,300 jobs, $700 million in local construction
investment and $1.7 billion in economic output."

Why is prevailing wage currently an issue?

Article II Section 9 of the Michigan constitution contains a strange way for a bill to become
law: a petition with sufficiently many signatures requesting a referendum can be pre-empted by
passage in the Legislature. This "initiated legislation" does not require the governor's signature
-- Governor Snyder has said he would veto this bill if he could! (When a corporate-backed bill is
too extreme for Governor Snyder. . . )
A petition requesting such a referendum was sent to the Legislature late in September with
likely enough signatures to qualify. The Senate earlier this year passed a repeal of prevailing
wage which was not acted on in the House, so a new version initiated there is likely to pass. The
question is then whether the House will pass the bill or send it to voters.

What can we do?

Michigan's Democratic Congressmen are already firmly against repeal. If your
Representative or Senator is a Republican, you can call them and make your position known.
Another possibility is a counter-petition: Citizens for Fair Taxes is circulating a petition at
fairfix.org to raise the state corporate income tax from 6% to 11% to make up for all the credits
they have received in recent years. This is unlikely to pass in the Legislature but might pass with
voters; at the very least, it would cost corporations money to fight. Faced with a two-front issue,
the backers of prevailing wage repeal might just reconsider their campaign and pull back from
trying to push prevailing wage repeal through the Legislature.
You can sign the corporate income tax petition, learn more and volunteer to circulate petitions
at fairfix.org.
If the prevailing wage petition does go to voters, it is likely to fail in November (or on a
special election day if this is set up). The Michigan Democratic Party would certainly campaign
actively against it, and we welcome anyone who would like to join us doing so.
[1] "Prevailing wages and government contracting costs", 2008.
http://www.epi.org/publication/bp215/
[2] http://www.faircontracting.org/PDFs/prevailing_wages/kansas_prevailing_wage.pdf
[3] "The Adverse Economic Impact from Repeal of the Prevailing Wage Law in Missouri," U.
Missouri, 2011. http://cas.umkc.edu/economics/resources/prevailingwagestudy.pdf
[4] http://www.sddt.com/Commentary/article.cfm?
SourceCode=20150909tza&Commentary_ID=361&_t=Understanding+the+economic+impact+o
f+prevailing+wage#.VhWKFqKs63Q
[5] http://www.toledoblade.com/Editorials/2015/09/27/Keep-prevailing-wage.html
[6] http://www.faircontracting.org/PDFs/prevailing_wages/Public_School%20Peter
%20Phillips.pdf