A recent Crain’s Chicago Business story covered why local leaders have such little control over the cost of the governments they’re in charge of: unfunded mandates, such as workers’ compensation, binding arbitration for labor contracts, pension coverage, and prevailing wage requirements for public works. The latter is an especially problematic contributor to ballooning government spending.
Crain’s writes, “It’s important to note, and often overlooked, that 1) wages are set based on compensation paid on other public works, not private-sector compensation; 2) municipalities have to pay the cash equivalent of the additional compensation, including pension benefits, paid on other public works; and 3) all of that must be calculated on a full-time-equivalent basis to understand it properly. The all-in result: The average total full-time-equivalent compensation, including benefits, for all job categories over all counties is $119,000.”
NFIB/IL has fought against harmful prevailing wage bills in the past, including one that would have allowed the Illinois Department of Labor to use collective bargaining agreements to set prevailing wage rates statewide, because they simply inflate wages, increase the cost of public works, and deter competition for these projects.
In a State Journal-Register op-ed about what Illinoisans need from their lawmakers in 2018, Illinois Policy Institute Chief Economist Orphe Divounguy called out elimination of prevailing wage: “Illinois must enact policies that stimulate investment. These could include reducing government involvement in labor contracts, eliminating costly mandates that hike the cost of government, such as prevailing wage laws, and reducing tax rates. Reforming policies that increase the cost of doing business and raise barriers to entry will make investment in Illinois more attractive.”
