Debate rages on whether ‘prevailing wage” repeal would save state money

LANSING — Inside the Capitol, lawmakers this spring debated whether to repeal Michigan’s prevailing wage law.

Outside, high atop the dome, construction workers were erecting scaffolding, preparing to repair damaged and corroded decorative features on the façade of the 136-year-old building. The $6.4 million project is the first such restoration since 1992.

As is required on all building projects funded with state dollars, its contractor — Lansing-based Christman Co. — pays its workers a prevailing wage, defined as union-scale wages and benefits. In Ingham County, a laborer earns $32.92 per hour under the county’s prevailing wage, according to the Michigan Department of Licensing and Regulatory Affairs. A painter earns $31.74 per hour. An operating engineer’s hourly wage ranges from $37.60 to $51.50, depending on the type of machinery they use.

Those hourly rates are at the center of a statewide and national debate over pay scales on public projects. Legislative Republicans, perhaps emboldened by new leadership and an expanded majority, have made repealing the 50-year-old law a high priority, either legislatively or by ballot initiative.

The push to repeal comes despite opposition from Gov. Rick Snyder, who sees it as detrimental to his efforts to attract skilled labor, and without hard data on whether it would save the state money as proponents claim.

Those factors — and that repeal in general is supported by non-union contractors and not supported by unionized ones — leads some to view the campaign as an attack on labor, akin to right to work.

“There’s no public outcry” about the prevailing wages currently being paid, said Patrick “Shorty” Gleason, legislative director of the Michigan Building and Construction Trades Council, which represents skilled trades unions including ironworkers, plumbers and laborers.

“People aren’t just beating down the Capitol doors saying, ‘You got to take this off the books.’ ”

Repeal introduced

Prevailing wage has been on the to-do list of some GOP lawmakers, contractors associations and conservative interest groups for years without success. But it caught fire in January when the Senate introduced a repeal in the first bills of this legislative session, Senate Bills 1, 2 and 3.

The bills, co-sponsored by new Senate Majority Leader Arlan Meekhof, passed the Senate and are pending in the House. But his counterpart, House Speaker Kevin Cotter, of Mt. Pleasant, doesn’t plan to fast-track a vote on the bills when the governor has implied he might not sign them.

“I would prefer that the governor sign (the legislation), obviously,” said Meekhof, of West Olive, “but if he’s reticent, I’ll find any way to get it done.”

Perhaps anticipating a veto, lawmakers are considering a backup plan — nearly identical legislation led by a petition drive that could not be vetoed by the governor.

A group billing itself as Protecting Michigan Taxpayers has launched a petition drive to collect nearly 253,000 signatures by late November to force the Legislature either to vote to enact repeal or put it on the ballot in November 2016. Snyder can’t veto petition-drive initiatives.

Protecting Michigan Taxpayers is a registered Michigan ballot committee. The petition effort is being funded by the Michigan Freedom Fund and the Associated Builders and Contractors of Michigan, a Lansing-based trade group that includes mostly non-union contractors. Both support repeal.

The Freedom Fund has ties to the DeVos family — its chairman, Greg McNeilly, is an executive at a company owned by Dick DeVos and managed his campaign for governor in 2006.

In a touch of irony, the fund’s new president is Terri Reid, who until last month was Snyder’s external affairs director.

Snyder declined to comment directly on Reid’s departure. Reid did not respond to a message seeking comment, but Tony Daunt, the organization’s operations director, told Crain’s she has a history of promoting grassroots and conservative causes and “she’s excited to be here.”

The repeal effort has lawmakers’ attention.

Cotter said at the Detroit Regional Chamber’s Mackinac Policy Conference that he hasn’t counted votes to know if enough support exists in the House to pass the petition legislation, but “there is broad support for repealing prevailing wage.”

Chris Fisher, ABC’s president and CEO as well as vice president of Protecting Michigan Taxpayers’ board, said the group would not have launched the ballot drive if it wasn’t confident it had lawmakers’ backing.

ABC also sued the city of Lansing in 2012 to throw out its local prevailing wage ordinance. The Michigan Supreme Court has agreed to hear the case on appeal from ABC after the Michigan Court of Appeals sided with the city. A date for oral arguments has not been scheduled.

Inflated rates?

Whether repealing prevailing wage saves money depends on who you ask.

Proponents often cite a 2013 report from East Lansing-based Anderson Economic Group, commissioned by ABC, that found Michigan taxpayers could have saved $224 million per year — and $2.2 billion in total — on K-12 and higher education building construction from 2002 to 2011 if prevailing wage didn’t exist. That was partly due to an assumption that prevailing wage inflated pay rates by 25 percent, the report says.

But that study’s findings were challenged in a 2013 report by University of Utah economics professor Peter Philips, commissioned by supporters of prevailing wage.

Philips wrote that Anderson’s study, authored by Alex Rosaen, based his report on “outdated and miscalculated” assumptions, one of which considered capital outlays on school projects solely as payments to contractors when they also include land purchases and other costs.

Rosaen, Anderson’s public policy and economic analysis director, told Crain’s that Philips’ critique of his use of capital outlay spending was fair and he’ll change the approach in future studies. A narrower accounting would have resulted in lower savings estimates, he said, but not enough to alter his findings.

He based his assumptions in part on findings from previous studies on prevailing wage, including one by Philips.

“This is an area of study where the data aren’t perfect and there are no perfect experiments to have us really know we have the answer right down to the penny, but the answer is very clear,” Rosaen said. “One person’s unnecessary costs are another person’s wages, so policymakers need to weigh one side against the other and think about what they think is most important for our state to have the best quality of life.”

In his study, Philips reviewed data from Kentucky, Ohio and Michigan and found no statistical difference in cost per square foot on school projects. All three states had periods in the 1990s without active prevailing wage laws.

Michigan’s law was suspended from 1994-97 when a federal district court ruled the state’s prevailing wage law was invalidated by the federal Employee Retirement Income Security Act; the U.S. 6th Circuit Court of Appeals later reversed that decision.

The nonpartisan Senate Fiscal Agency, in its analysis of the Senate bills, said it couldn’t determine whether any savings would result from repealing prevailing wage, since the “lack of available data makes it difficult to estimate with any certainty how much would be saved if the bills were enacted.”

Any savings would depend on the new wages paid to workers, as well as how much competition exists at the time contractors bid on projects, the agency said.

Savings like those presented in Anderson’s report “just do not occur in the reality of construction markets,” said Bart Carrigan, president of Associated General Contractors of Michigan, which represents roughly 200 construction firms across the state and is the counterpoint to ABC.

AGC negotiates contracts with trade unions on public projects, including equipment operators, carpenters, masons and ironworkers. Wages are bargained regionally and tend to be highest in Detroit, Carrigan said. Wages generally are set at 75 percent of Detroit-area wages in Lansing, Saginaw and the Upper Peninsula; 68 percent in Grand Rapids; and 65 percent in Traverse City, he said.

Two-thirds of its member contractors use union labor on their projects.

Quality concerns

When Michigan’s law was suspended in the 1990s, any cost savings were short-lived because fewer contractors bid on public projects, which ultimately drove up prices, Mike Stobak, vice president of Southfield-based builder Barton Malow Co.’s public and education group, testified in May before a Senate committee.

In addition, Stobak testified, workers often left contractors in search of higher hourly wages at another company, which prompted concerns about project quality.

“I applaud the effort of exploring more cost-effective means to deliver publicly funded projects, and we should examine all alternatives currently utilized in other areas of the country,” he testified. “But, please, let’s avoid the temptation to take the easy route and return to what we know is a failed approach.”

Mike Houseman, president of Grand Rapids-based Wolverine Building Group’s North America division, said quality and safety on building projects are regulated by the state and have no bearing on prevailing wage.

Houseman said contractors aren’t looking to pay workers less than they already pay, but rather let the market settle on a wage that is truly prevailing in their communities. He considers the prevailing wage now paid in West Michigan inflated because the region doesn’t have as many union-affiliated contractors as metro Detroit does. Wolverine is not a union shop.

Data from LARA show some trades, including boilermakers and asbestos abatement laborers, do earn the same wages in Kent County as in Wayne County.

But for most workers, that’s not the case. A carpenter in Grand Rapids, for instance, earns $27.26 to $35 per hour, while a similar worker makes $46.04 to $51.19 per hour in Detroit. A roofer is paid $25.70 per hour in Kent County and $48.46 per hour in Wayne County.

“We believe that repeal of prevailing wage would be a huge benefit to Michigan and its economy,” Houseman said. “It’ll create jobs. It’ll create more infrastructure projects, as well as ultimately save taxpayers a significant amount of money in the construction of state-funded projects.”

Worker shortage

If prevailing wage is repealed, union leaders say they will have to cut training budgets for skilled trades under pressure from contractors to lower bids.

That’s the alternative to cutting wages and benefits, including health insurance and retirement plans, said Gleason, of the building trades council.

And that’s problematic, union leaders say, considering Michigan has a shortage of incoming workers in the skilled trades.

The work is physically demanding, with unpredictable schedules and outdoor work in a variety of weather conditions. Patrick Devlin, the trades council’s secretary-treasurer, added that repealing prevailing wage could deter people who might otherwise consider the skilled trades out of concern they would be paid less for challenging work.

“The timing couldn’t be worse on this,” Devlin said.

Snyder has made boosting enrollment in skilled trades programs a focus of his administration. On Mackinac Island, TV host Mike Rowe, of Discovery Channel’s “Dirty Jobs,” urged business leaders to fight the stigma that vocational education is somehow less desirable than a four-year college degree.

That’s the irony of the prevailing wage debate happening now, said AGC’s Carrigan. Michigan lost skilled workers to other states and industries when construction shed jobs during the recession, he said, and lawmakers want to curb wages just as the state is trying to lure them back.

But Fisher, of ABC, said it’s prevailing wage — not the lack thereof — that hinders recruiting.

“When you have less construction activity that can be financed, that can be afforded and that can be put into place,” he said, “there is a need for less construction workers, fewer construction companies and overall less construction activity.”

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John Sullivan
Mon, 06/15/2015 - 10:08am
My experience as a consulting engineer for many public projects over the past 45 years indicates the prevailing wage laws increase the price of a project by 10 to 15%. Eliminate prevailing wage requirements!
Bart C.
Mon, 06/15/2015 - 10:34am
Sullivan posits another factoid or opinion that cannot be can't get that level of project savings when wages are only 19-21 per cent of project costs .
Mon, 06/15/2015 - 5:49pm
Where did your 19 - 21% come from?
Fri, 07/24/2015 - 10:34am
Its not just is the associated costs of the inflated wages as well.
Jordan Genso
Mon, 06/15/2015 - 2:36pm
John, do you really think the state faces a problem of **too many** people a middle-class wage? It doesn't make sense to me that the Republicans are so intent of "fixing" that.
Tue, 06/16/2015 - 12:50am
Would the project engineer's pay level be affected by this repeal ? Would you personally be willing to take a pay cut ? I believe our Michigan legislators should not be paid the exorbitant amount they receive for basically part time work . Why is there no action being taken up in Lansing to reduce the states cost at the legislative level ? They seem to be hell bent on reducing everybody else's income why not their own ?
Mon, 06/15/2015 - 10:31am
A LABORER making $33.00 per hour - is NOT inflated? Only in a union, would that be considered 'appropriate' pay. And leave to unionist to provide a 'scare' tactic that is baseless: Patrick Devlin, the trades council’s secretary-treasurer, added that repealing prevailing wage could deter people who might otherwise consider the skilled trades out of concern they would be paid less for challenging work. A moron, as if the job doesn't pay what is should- THEY WON'T APPLY.
Bart C.
Mon, 06/15/2015 - 10:40am
the laborer pays into a pension fund , a health care fund and an apprentice fund that pays for his apprentice training and required ongoing skills upgrades throughout his career...because of seasonality laborers work on average 1400 hours per year -outdoors in traffic or on temporary work platforms...$33.00 sounds great , but you have to put it in perspective...
Jordan Genso
Mon, 06/15/2015 - 2:38pm
Ed, if you think skilled laborers shouldn't earn a middle-class wage, then who should? The skilled workers aren't getting rich off the taxpayer, they're simply trying to be middle-class. If anyone needs to understand why the middle-class is shrinking, look no further than the Republicans' ideology of opposing prevailing wage as a prime example.
Tue, 07/07/2015 - 4:18pm
The wages that are posted are more than just "on the check" wages. That figure includes health care, retirement, and training. Maybe if somebody would actually look into what things like health care cost, they wouldn't be so quick to choke at the hourly rate. How about we take away your employer provided health insurance and save your company $15-$20,000 a year per person. Then we will cut your wages by 40-50% and say it's to save the state tax payers money. Only since you pay a percentage of your income in taxes, the state tax revenue will greatly decrease. Sounds like a great idea!!
Mon, 06/15/2015 - 10:34am
The only difference between public and private wages are some antiquated law that makes one more valuable than the other; yet for the same work. How is a public job worker more valuable? Why does this type of discrimination exist? How is public money more valuable? Conversely, how is public money more available and valued less? How is someone in a metro area worth more simply by the geographic location? The cost of living from one area to another varies little and many workers commute. From what I read in the article and the previous one in 'Bridge' on the subject, the wages without prevailing rates is pretty fair and there are many who would relish it. The perhaps good intentions in the original thoughts on prevailing wages was to ensure workers got paid a decent wage as public projects union workers got protection. As time goes by, the unintended consequences surface; especially since 2006. The reality check surfaced. Paying market rates versus prevailing have shown the latter to be obsolete as neither ensures any quality or quantity of/for workers. The day of public expenditures as the 'sugar-daddy' of waste and cost are long over. The prevailing wage is a left over dinosaur of that era long gone. Union protectionism has no place as choosing favorites is unfair and unjust; especially by government. Every argument for the prevailing can be blunted with logic, truth and reality. Kudos to the legislators who are interested in saving the taxpayer some of their money and perhaps making it go further. The market place will make any adjustments necessary without the heel-of-the-boot of a law being required.
Tue, 06/16/2015 - 1:07am
Who will train these new underpaid workers ? The construction companies will not do it . Sure the market might bring wages down a bit so will it bring down quality of the workers hired . Prevailing wage blunts the construction season worker imported form Mexico . If these workers must be paid the prevailing wage there is little incentive to import them . Many construction companies in the private sector use such labor instead of Michigan workers because imported labor is cheap . Cheap skilled labor and anti union sentiments in Lansing is all this is about . The Republicans are hell bent on destroying the middle class in favor of cheap labor for their rich backers . What good are increased numbers of $9.00 an hour part time jobs going to do for Michigan's economy or working families ?
Mon, 06/15/2015 - 11:31am
The above listed rates are NOT per hour rates. They are the total of the hourly rate, pension, healthcare and training. Michigan union construction wages are some of the lowest in the country and the work rules are also some of the most reasonable. Their training programs (apprenticeship schools) are outstanding, not something the open shop sector can claim.
Chuck Fellows
Mon, 06/15/2015 - 1:02pm
What we really need at this point is a prevailing wage for legislators set at the minimum wage for the state for only those hours the legislator is actually present in Lansing. If you do not offer a competitive wage, especially in the trades where the knowledge resides with the individual and not the organization, the individual will seek a competitive wage elsewhere. We have had more than forty years of disrespecting the trades and now we have a severe shortage.
Tue, 06/16/2015 - 12:56am
Chuck, It isn't about disrepecting the trades, it is about lack of appreciation of work and the value it provides to the person doing the work. Wages are a means to place value on the work, but if a person never learns to want to work they will never learn the knowledge and skills that will earn them a better wage. When has any legislator care about what an employer gets for the required wage? A simple test is when have you heard a proponenet of wage laws/regulations ['prevailing' or 'minimum'] ever talked about about the work to be provided for that wage. Why shold the kids/young adults of today be interested in what they can or should do for a desired wage when the people governing our State don;t care? Until the laws and politicians talk about the responsibilities of the person receiving the government required wage or other support then there will be fewer people sacrificing for a better education, the acquisition for specialized training, and the willingness to compete for the skilled work. When was the last time any writer on Bridge talked about work and earning a better wage?
Mon, 06/15/2015 - 1:08pm
Expand school help for K-12 and secondary education help for the kids of skilled trades parents. Theses parents and Union members might give back some? The Elected Officials are not very creative. The people in Lansing are so short sited, that they could not see the police car right next to them to slow down. No wonder we are known as "The Pot Hole State". Then when these type of schemes to help parents save for their kids, is cut off by the next set of people in Lansing.
Mon, 06/15/2015 - 1:33pm
In 2015 sixty per cent of wage earners in Michigan earned less than $40,000. a year. Less than forty thousand is chump change. It is not a living wage. A worker cannot pay for rent, food, transportation and health care on such an income, especially after state income taxes, property taxes and sales taxes are deducted from this amount. And there are no extra dollars for a savings account or retirement. Michigan Republicans never opposed the $1,000 AN HOUR paid to lawyers involved in the Detroit bankruptcy hearings. Instead, they went after retirees' pensions, pensions earned but yet to be given. And people wonder why the middle class is shrinking and the wealthy are amassing most of the economic benefits. I support the prevailing wage for public projects. The same MI residents who pay the taxes, benefit from those taxes, and the public gets professional, skilled labor.
Jordan Genso
Mon, 06/15/2015 - 2:42pm
Exactly. How can people be so blind as to not see the issue is whether or not we want even fewer middle-class jobs. Cutting those jobs' pay only exacerbates the growing income gap, which any rational person would recognize is unsustainable. Yet the Republicans choose not just to blindly ignore that unsustainable problem, nearly every one of their economic policies would only make it worse.
Mon, 06/15/2015 - 1:36pm
Taxpayers paying more construction than we should doesn't make sense. $33 dollars vs. 15 for a laborer.. And the restrictive work rules are a hidden cost that increases the cost even more. Michigan's economy has inproved since right to work passed. More jobs and income. Right to work states lead the nation in creating jobs. Replealing prevailing wage laws will be a good thing for Michigan.
Bart C.
Mon, 06/15/2015 - 3:22pm
the Laborer making $33.00 per hour has approximately one third of his pay directed to jointly administered trust funds for pension , health care and apprentice / now he makes $22.00 take home pay( $30,800.00 annual ) ...they average 1400 hours per year because the work is seasonal...they have to travel to where the work is...they work on temporary work platforms at heights or under traffic...there are no restrictive work rules in the prevailing wage structure...Laborers are a production craft for highway and underground and tend skilled trades on building and heavy construction...they are skilled,and are trained in government approved apprentice programs ...the $15.00 laborer will be a burden to society and probably will not have pension or health care or training which is why public entities do not want prevailing wage seems like its broke to the idealogues and taxpayer tea partiers but it ain't broke and works well.
david waymire
Mon, 06/15/2015 - 1:58pm
Worth noting that this proposal has very little support among Michigan voters. Fewer than a third would support ending the prevailing wage. The goal of this small but well funded group is to buy legislation that would overcome Gov. Snyder's veto.
Bart C.
Mon, 06/15/2015 - 2:34pm
Houseman's and Fisher's arguments are weak and in the last paragraph nearly unintelligible , and they are debunked by Mr.Stobak's comments regarding the three year period when the Prevailing Wage Act was suspended... the Senate Fiscal Agency says that it couldn't determine whether any savings would occur if the Act was repealed...the inflated , theoretical savings that are predicted could evaporate and the taxpayers could see projects built by employers and employees from other states...or countries! Why take a flyer on something that helps only one association of non union contractors when the public owners and school districts don't even support repeal...they are the ones who get quality projects built on time on budget to required specs by their local contractors who then employ local skilled workers who can afford to buy homes and pay taxes...there is no taxpayer cheating on prevailing wage projects...they deduct all taxes from payroll unlike contractors that pay cash or misclassify workers...
Fri, 07/24/2015 - 10:50am
Then you obviously don't have any issue with the public voting on this issue. Since it had no chance of passing
Mon, 06/15/2015 - 4:07pm
I have a Nobel idea if you want to save the state money let the people vote on our state representatives to see if the feel the are getting their money's worth and if not cut their prevailing wage.
Henry Kramer
Mon, 06/15/2015 - 6:22pm
What I have not seen mentioned is that the prevailing wage laws say nothing about Union wages. It simply refers to the wage rates that prevail in the area where the work is being performed. That typically is the wage rate that provides the standard of living for that geographic area (higher in Detroit than the UP or Grand Rapids as an example). It protects the tax paying citizens and also stops public bodies from bringing in workers from other states (or countries) that would undermine the local economy with cheap labor rates. I can't speak for Michigan but on a nationwide basis the prevailing rate is more often the non-union labor rate, not the Union rate. Annual surveys are performed and the rate that prevails is the set rate for the next year. Prevailing wage laws protect the taxpayers and it would be detrimental to repeal the law.
Fri, 07/24/2015 - 10:56am
To clarify then. In MI prevailing wage is the local union wage for the job title listed. I'm sure ppl would be willing to pay over market costs to repair their own house. But since we are talking about how money is spent by others for others....decisions made are completely different
Lola Johnson
Mon, 06/15/2015 - 7:35pm
We are presumed to naively believe that contractors who need not meet prevailing wage would, naturally, pass the savings on to the taxpayers. Seriously? Yes, one can find folks willing to work cheaper, they come over the border every day. Again, that $33/hr includes health care, pension, and education costs. Hiring cheaper labor with no benefits will not save money. We will simply end up paying for those poor folks on the back end. Medicaid, SSI, food stamps, etc. Do we want our children traveling on bridges built by minimum wage workers? What is it about hourly workers having a little dignity and financial security that is so offensive to some?
Tue, 06/16/2015 - 12:25pm
I have a very hard time allowing our legislature to cut any wages except their own.
Wed, 06/17/2015 - 8:22pm
Republicans are following a national agenda by attending ALEC conferences promoted by the Koch brothers to diminish Union influence in state and national elections. Hasn't anyone taken notice on bills they pass and then attach an appropriation bill to it so there can be no voter repeal. They are corrupt to their oath of office! Let their pay stand but no lifetime pension or health insurance for the few years they really spend on the job! End term limits and it would be better for all of Michigan!
N Huck
Sun, 06/21/2015 - 10:06am
The billionaire wants to cut wages of skilled labor ers who are making 60-75,000 per year. 1. Where is the trickle down? 2. How smart is that when it ultimately impacts the quality of life of those who build our infra Structures, drive our roads and serve the billionaire?