Michigan’s prevailing wage law increases the cost of construction on state-supported projects by 10 percent to 15 percent, adding hundreds of millions of dollars to the burdens borne by state taxpayers. The law also forces union work rules and wages on a construction industry that is increasingly nonunion. Unions represented 32.8 percent of Michigan construction workers in 1986, but only 22.1 percent of construction workers in 2006.
It is not clear that prevailing wage laws improve the quality of construction or the safety of construction workers. To the extent that prevailing wage laws improve the productivity of construction workers, that improvement is more than offset by the higher wages that are also associated with prevailing wage states. And the prevailing wage law has a reverse Robin Hood effect: Its main beneficiaries are construction workers who already earn hourly wages well above the average for workers in this state.
Lawmakers may be concerned that prevailing wage repeal will leave construction workers vulnerable to downward pressure on wages in the marketplace. This concern is understandable, but misplaced: Construction spending by state and local governments in Michigan totaled $5.4 billion in 2002, only about 15 percent of the $36 billion in construction work done in Michigan that same year.
At a time when a shrinking state economy is leading to lower tax revenues for state and local governments, a policy associated with increased costs, lower employment and minimal (if any) benefits is ripe for repeal. A temporary judicial suspension of Michigan’s prevailing wage produced exactly the sort of effects that Michigan policymakers should be looking to bring about in the state’s current economy: increased employment and efficiency in government spending. Repeal of Michigan’s prevailing wage law would be the best option.