State or federal, protectionism hurts

This year, “protectionist” bills have been introduced in the Michigan Senate and passed by the House that, among other things, require employers who receive state and local construction, service or purchase contracts to only hire Michigan residents, with some exceptions. The bills also impose “prevailing wage” provisions favored by unions on state contractors. (Prevailing wage is a law that prohibits awarding contracts to firms that submit the lowest bid unless the contractor pays so-called "prevailing wages" based on union pay scales in a particular part of a geographic region, rather than market rates.)

Protectionism is an ever-popular area for demagoguery by politicians on both sides of the aisle, whether at the state or national level, while economists of all stripes agree that it always imposes “deadweight losses” on the overall economy, making us all less well off in the long run. I can’t speak for Michigan employers like Haworth furniture or Kelly Services that may seek contracts with other state governments, but suspect that they would not be grateful if our legislature helped promote a state-level trade war by passing its own brand of “Smoot-Hawley” protectionism.

Additionally, with or without the discriminatory prevailing wage provision, such mandates increase costs of a state government already looking at a $2 billion gap between desired spending and expected revenue.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.