State lawmakers did all Wisconsinites a favor in 2015 by repealing most of our state’s prevailing wage laws — government mandates that require private contractors to pay artificially high wages on public construction projects.
The effect will be to save Wisconsin taxpayers millions on public construction projects, and provide workers with more opportunities to find well-paying jobs.
Unfortunately, opponents have resorted to spreading misinformation about the benefits of this positive reform. With Gov. Scott Walker now proposing to fully repeal what remains of our state’s prevailing wage, it’s important to set the record straight.
Prevailing wages come with a long and sordid history. The federal Davis-Bacon Act — on which many state prevailing-wage laws are based — was originally passed in part as a way to price minority workers out of lucrative construction projects. Although the racial intent of these laws might have disappeared over the past 80 years, they still have the effect of benefiting large companies over smaller competitors.
Small construction companies are simply unable to afford the government-mandated wages. A study from the Wisconsin Taxpayers Alliance found that Wisconsin’s prevailing wages many times increase the cost of compensation of construction workers on public projects above the market rate. While larger companies are able to absorb these added costs, it’s simply a nonstarter for many companies throughout the state. And that’s part of the problem: They’re designed to benefit unionized contractors who can work with the added costs, but at everyone else’s expense.
But repealing the prevailing wage isn’t only about leveling the playing field in the construction industry — it would help every Wisconsinite in the state.
Consider the enormous taxpayer savings that would accompany this reform. The same study from the Wisconsin Taxpayers Alliance looked at how the state’s system of calculating the artificially inflated wages adds to the final price tag. Only looking at public building and heavy construction projects in 2014 — not including roadwork projects — the study found that Wisconsin could’ve saved nearly $300 million. When construction companies are forced to pay inflated wages, it’s taxpayers who end up paying the bill.
Those taxpayer savings could be applied to other important budget items. Our infrastructure needs improvement, but artificially inflated wages leave less money to repair cracked pavement and crumbling bricks. Eliminating prevailing wages — and the wasteful spending they enable — is a far better alternative than raising transportation taxes, a step that some are now calling for.
During a 30-month period from 1994 to 1997, in which the wage law was ruled invalid in Michigan, one school district completed a project at 13 percent lower cost than it could have if prevailing-wage laws were in effect. However, those cost savings ended when the law was re-enacted. A 2007 study from the Mackinac Center found that school districts spent $109 million more than necessary because prevailing wages affected 90 percent of their construction projects in 2002.
Ohio also saw taxpayer savings when it exempted school construction projects from its prevailing wage requirements in 1997. Over the next four years, the Buckeye State saved almost $488 million on those types of projects, according to a government study. One of the study’s respondents mentioned how the exemption “helps school districts by providing more budget money to extend or add additional projects.”
Supporters of the prevailing wage try to counter these facts by saying the higher wages produce a higher quality of work. Nonsense. Just look at Ohio’s school construction projects after the 1997 exemption. The government study found fully 91 percent of school districts reported no change in the quality of construction. And of the remaining 9 percent, six reported that quality had improved; only three said it had declined.
These are the facts about the prevailing wage. Despite the misinformation from its supporters, repealing this government mandate would level the playing field for private contractors and make our tax dollars go further. Wisconsin lawmakers should finish what they started in 2015 and totally repeal this unnecessary law.