Font size:
By Holly Wetzel
MIDLAND, Mich. — A new study from the Mackinac Center for Public Policy shows that prevailing wage laws create unnecessary high costs for taxpayers on public construction projects. The study examines the impact of these laws across the country, including in Michigan, where the Legislature recently reinstituted this policy.
Prevailing wage laws force taxpayers to pay union wages to workers on public construction projects. It requires firms contracting with governments to pay the local or “prevailing” wage in an area, which is set by union wage scales. These laws often price out nonunion construction firms, reducing the competitiveness of the bidding process. These artificial and higher costs are paid by taxpayers who foot the bills of construction projects like roads and schools.
The study, “The Costs of Prevailing Wage: Evidence From State Spending on Road Construction,” found that these laws increase the cost of road construction by 8.5% and 14.3%. Based on the construction and labor costs in Michigan in 2018, that would mean an unnecessary increase of between $5,900 and $9,200 per mile of road.
The findings from the study reflect similar findings of other Mackinac Center prevailing wage studies, which were performed in the 1990s and 2000s. These studies found prevailing wage raises construction costs by 10% to 15%.
“Michigan taxpayers should fully expect future road construction costs to leap with passage of their state’s new prevailing wage law,” said Michael Hicks, Ph.D., author of the study and professor of economics at Ball State University. “Research has found that this policy inflicts significant costs on taxpayers, costs that might be better spent elsewhere, including on more roads and better bridges.”
In addition to Michigan, the study examined five other states that repealed their prevailing wages in the last decade, including Arkansas, Indiana, Kentucky, West Virginia and Wisconsin. The study estimates the additional cost per mile in each state:
Read the full study here.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
Please consider contributing to our work to advance a freer and more prosperous state.
