Unions Abusing Prevailing Wage Law
Sunday, March 2nd, 2008 By Marc KilmerIn Ohio’s neighbor to the north, Michigan, there is an interesting prevailing wage issue playing out. What is a “prevailing wage”? As Buckeye Institute scholar Jeff Williams describes it:
Ohio law still requires that construction workers on government projects be paid union negotiated wage rates, also called “prevailing wages.” These wages, however, are not really “prevailing” in the sense that markets freely determine the wage rate based on supply and demand. The “prevailing wage” is an administrative wage, set by government officials, based on union wage rates where the work would be performed. Union wage rates are almost 18 percent higher than market wage rates in Ohio.
After two years of legal wrangling and union harassment, a non-union contractor working on Lakeview High School in Battle Creek received word from the Department of Labor on its prevailing wage “violation” — it had underpaid an employee $10.56 on a $3.9 million contract.
The Lakeview High School situation is described in this article by the Battle Creek Enquirer and illustrates the lengths to which unions will go to ensure that taxpayers are forced to pay higher-than-necessary prices for construction. As the owner of the non-union contractor put it, “Unfortunately for Michigan taxpayers, the IBEW’s grievance against our company cost the state of Michigan thousands of dollars to investigate and additional costs to Lakeview School District to gather and produce information.”
Unions, of course, don’t see it this way. As one of their representatives put it, “When the materials are the same and the law says that prevailing wages have to be the same, how does (a non-union company) get down to 20 percent (lower than) the next-lowest bid? They cheat their workers.” It is hard to see how workers are being cheated, though. No one forces them to take non-union jobs. They and their employer freely decide on wages. To the union mindset, however, non-union workers aren’t smart enough to bargain for their own wages, I guess. If they aren’t being paid what the union thinks is fair, they are being “cheated.”
Jeff Williams sums up the issues well:
Citizens and taxpayers are paying dearly for Ohio’s prevailing wage law. In 1995, the Ohio Legislative Budget Office estimated that repealing the prevailing wage law would save state and local governments between $80 million and $236 million annually. These savings are large, but even they do not include the labor that could be saved by eliminating the enormous paperwork the law requires. This labor savings would add at least $9.8 million.More than the savings, however, this issue involves responsibility, fairness and trust. By setting wage rates higher than market wages, the prevailing wage law prevents elected officials from carrying out their responsibility to use taxpayers’ money wisely. They are, in effect, required by law to spend more money than necessary. The prevailing wage law is particularly unfair toward contractors and workers at non-union construction firms. Firms can include non-union fringe benefits in their wage calculations only after enduring an onerous approval process. Rigid and unfamiliar job classifications and massive paperwork requirements create a complex system that is a minefield of potential trouble for those inexperienced in it. Thus, the law effectively prevents many non-union firms from bidding for government business. The process methodically shuts non-union and inexperienced contractors out of $3 billion in construction work each year.
Dr. Robert LAwson also wrote about this issue for the Buckeye Institute here.
Tags: Labor
