Michigan’s Prevailing Wage Law Drives Up Costs
Government should do fair bidding for projects
Editor’s note: This article first appeared in The Detroit News on Nov. 9, 2017.
I recently installed a new roof on my house. Before doing so, I did what any responsible homeowner does — I got bids from different companies and made a decision by balancing quality and costs and using market competition to my advantage.
Now, luckily for me, I learned how to roof from my father, so the best option for me turned out to be doing it myself. Labor costs were minimal, except for some pizza and beer for the friends who helped.
These calculations are what most people make when considering construction projects on their own homes and businesses. But imagine if I had determined from the start that no matter who did the project, I was going to spend a minimum of $12,000 for a new roof because that’s the average price in some areas.
You’d probably find that to be a bit silly and a real waste of my money. Why would I pay more than I need to for a service just because it’s the going rate that other people pay? But that is exactly what Michigan’s prevailing wage law does. The decades-old law mandates that all government entities pay union prices for construction projects. Michigan’s law is the most stringent in the nation, setting arbitrary — and often absurd — prices for schools, roads, parks, libraries, and other public construction projects. This drives up costs by hundreds of millions of dollars every year, paid for by taxpayers.
In short, these laws mandate specific wages for those working on government projects. It wipes out local control and competitive bidding. Even if local school boards or city councils can find a higher quality at a lower price or more bang for the buck, they aren’t allowed to pay less.
Steve Zurcher is a glazier in the Upper Peninsula who installs windows for commercial firms as well as public schools and universities. When he works on a government project, his bid must include the union-mandated wage of more than $43 per hour. That’s more than twice the cost a glazier typically charges in rural, low-cost Dickinson County. In other words, labor costs for a project can be 100 percent higher if it’s paid for by taxpayers.
The prevailing wage law often benefits larger construction companies at the expense of the little guy because they are better positioned to swallow the mandated higher cost. This can put Michigan’s small businesses at a disadvantage when competing with out-of-state firms near our borders with Wisconsin, Indiana and Ohio.
“Wisconsin glazing contractors see prevailing wage as an essential benefit and affords them the means to be able to bid on projects in the U.P.,” said Zurcher, who competes with Badger State firms. “It forces me to elevate my labor costs to their level, which removes a major and key competitive edge we would normally have. Any supposed benefit the community and my employees might gain from the increased hourly pay is just as easily lost to competition from businesses outside our community.”
Gov. Rick Snyder is opposed to changing the law and has reportedly pledged to veto any bill that undoes prevailing wage. But there is a solution — a citizens’ initiative. Taxpayers around the state are sick of paying higher costs for the same service and are signing a petition that would allow legislators to vote to eliminate the law without the governor’s signature.
If the initiative is signed into law, Michigan would finally eliminate an outdated and arbitrary relic. This would mean more money for transportation, schools and other core government services.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
2017 Was Good For Michigan
State economy continues to expand
Michigan businesses and residents continue to produce more and employ more people, and the economic well-being of residents increased in 2017.
The available economic data that has been released so far is optimistic, though much of the information about the state’s 2017 performance won’t be released until later in the year.
The first three quarters of 2017 saw per capita personal incomes increased by 2.4 percent over the previous year. That is higher than the 2.1 percent national average and 12th-highest among the states. And it is a good indicator that Michigan residents are more prosperous.
The latest report on housing prices says Michigan’s year-to-date home prices increased 12th-most among the states over the year and the most in the region.
Employment continued to increase. The survey of employers pegged average year-over-year growth at 67,100 jobs for the first 11 months of 2017, a 1.6 percent gain. The survey of households pointed a little higher, at 72,300 jobs, but still a 1.6 percent gain.
Michigan’s population increased from mid-year 2016 to 2017, according to estimates. Migration turned positive, with gains in the number of people coming into Michigan from other countries and a smaller loss of people to other states. That lags national growth, but it is an improvement from being the only state to lose population from 2000 to 2010.
That’s important. The value of all of the things produced and services provided in Michigan, adjusted for inflation, has fully recovered from Michigan’s one-state recession. The measure, real gross domestic product, came in at an annualized total of $446 billion in the second quarter of 2017, the most recent figure available. That is above the $431 billion for all of 2005.
And after Michigan suffered by being the state with the most people leaving, there is a roughly even flow of people moving in and moving out, according to data from United Van Lines. Better yet, Michigan was best in the region. The report also noted that the state lost people due to retirement but had more people moving in for work-related reasons than leaving for work-related reasons.
There are some policies that can enhance the state’s economic growth. Lawmakers can afford to reduce the state personal income tax and let residents keep more of their earnings. And the state can improve the state’s occupational licensing regime. But the state’s growth has been strong and in some measures the state has fully recovered from a decade of awful performance.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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