For those unfamiliar with Ohio’s prevailing wage law, here’s the way it works: Every time state or local government funds a construction project over $50,000, by law it must pay above-market wages. Every time an Ohio government remodels or repairs its buildings, if the cost exceeds $15,000, it must pay above-market wages. Under current law, it doesn’t matter that the same (or higher) quality work could be at lower cost. In fact, performing the work more cost effectively at a rate lower than the prevailing wage would be illegal.
Why? 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.
About three hundred separate regional union contracts are sent from union locals to the Ohio Bureau of Employment Services in Columbus. The OBES accepts these wages unaltered and writes them into law. Workers at the bureau then send out bulky packages containing the mandated wage figures to local governments in Ohio. The State sets prevailing wage rates for all manner of construction jobs. Union wages are listed for common construction occupations, such as bricklayers and cement masons, as well as uncommon and almost unknown occupations such as bottom men, tunnel laborers, swinging scaffold workers, mockers, and powder men.
Prevailing wage rates must be included in every bid package when government contracts out large construction, repair and remodeling projects. Government officials monitor compliance by requiring weekly reports from local governments and contractors showing job categories, wages, and hours worked. This system has been in place in Ohio since 1931.
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.
Trust in government is reinforced when local officials bid out public construction jobs using a scrupulously fair system. Elected officials earn respect when they award contracts to firms that do excellent work at reasonable prices. Unfortunately, the prevailing wage law has the effect of preventing both of these outcomes. Repealing Ohio’s prevailing wage law would produce savings by reducing construction costs for public projects and by eliminating regulatory red tape. Nine other states repealed their prevailing wage laws in recent years. Perhaps, in 1997, a new Ohio legislature will perform the same service for Ohioans.
Jeff Williams is an adjunct scholar with The Buckeye Institute for Public Policy Solutions.