Michigan has been in the news lately for its repeal of the prevailing wage laws.
The outdated laws guaranteed union scale wages to be applied on state construction projects and was originally put into place in 1965.
“Michigan’s antiquated prevailing wage law results in overcharging taxpayers on publicly funded construction projects by requiring that union-scale wages be paid regardless of whether a contractor has non-union employees,” said NFIB Michigan State Director Charlie Owens in a NFIB article. “Estimates of the additional cost to taxpayers ranges from 10 to 15 percent on a project.”
According to an editorial in the Wall Street Journal, the reform will save taxpayers 10 to 15 percent. Non-union workers make up nearly 80 percent of Michigan’s construction industry, and dominate private building.
One example of the outdated law costing taxpayers is Steve Zurcher’s 2014 bid to do work on Michigan Technological University’s new welcome center. After winning the bid, his workers, who normally earned $20 an hour, had to pay the prevailing wage of $43.35 because it was a public project. Thanks to that increase he had to raise his bid and cost the taxpayers an additional $12,000.
The Mackinac Center estimates that the prevailing wage mandate has added about $400 million a year to the cost of roads, building, and other public works in Michigan.
“The Michigan law was especially onerous, outlining some 500,000 classifications of construction jobs and corresponding pay. This can mean that a contractor must pay one hourly rate for a worker for installing drywall but a different rate for painting. The rules deterred small businesses from bidding for government business and added costs when they did,” the editorial says.
Michigan has joined a number of states in their repeal of different versions of their own prevailing wage laws including Indiana, Kentucky, West Virginia, Missouri, and Wisconsin.
