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GOP attacks prevailing wage rule

Sean Ryan

The Republican Party of Wisconsin falls on the side of those who say prevailing wages increase project costs.

It is one side of a national debate coming to a head in Wisconsin as Gov. Jim Doyle’s budget would align the state with federal requirements that prevailing wages apply for projects using $2,000 or more in public money. The Republican Party of Wisconsin warns the rule would kill developments, and the party’s executive director, Mark Jefferson, said it’s easy to prove the point.

“If we’re talking about creating a floor, by definition, that means those costs are not being met right now,” he said. “If they were paying that much, they wouldn’t feel the need to put in this legislation.”

Researchers in the U.S. are split on whether Jefferson’s prevailing wage argument is correct.

Dale Belman, professor in the Michigan State University School of Labor & Industrial Relations in East Lansing, Mich., said there is no solid evidence prevailing wages increase project costs if groups factor in worker productivity increases.

“Academic research helps clarify what are the issues involved in the prevailing wage,” he said. “It’s not just a direct cost issue. It’s things such as who’s paying the medical costs and quality of construction.

“The academic research tends to be a check on what’s reasonable and what isn’t.”

On the other side of the debate is a January 2008 study of projects in New York state supporting Jefferson’s assumption prevailing wages increase project costs. The study logged the cost difference between prevailing wage projects and private projects, and the Center for Governmental Research Inc. estimated prevailing wages increase cost by 36 percent in the New York City metropolitan region.

Cost differences of that size probably will affect developers’ decisions, whether they are in New York or Wisconsin, said Kent Gardner, president and chief economist of the Rochester, N.Y.-based nonprofit government research group.

“If you are down in Racine and Beloit and you are not too far from the Illinois border and you have a distinct difference in costs, you will see development migrate,” he said.

Research focusing only on wage differences does not account for savings from other sources, such as higher productivity, said Frank Emspak, professor emeritus with the University of Wisconsin-Extension School for Workers. Wages are only one component of a construction project’s budget, and other things, such as lost time due to weather, can be even more significant, he said.

“To isolate just the prevailing wage as the driver for project cost is probably not accurate,” Emspak said.

With researchers falling on both sides of his argument, Jefferson said he is sure the budget measure will hurt Wisconsin development.

“We can see a situation where costs are going to go up for projects and slow down the economy in the state even more,” Jefferson said. “Why would we want to expand it further at this time of the economic cycle, of all times?”

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