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Sunday, 28 June 2015 17:08

Report: Repealing prevailing wage would not help construction industry

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Report: Repealing prevailing wage would not help construction industry PHOTO: ELIJAH BRUMBACK

Amid calls from Republican lawmakers to repeal the state’s prevailing wage law, a new report says doing so would have a detrimental effect on the state’s economy.

Written by a consortium of policy analysts and economists from around the nation, the report calls into question the assertion that repealing a law mandating union-level wages on publicly-funded construction projects would result in better economic conditions.

“The belief that reducing wages will reduce costs is based on an incomplete understanding of the construction industry,” according to the report prepared by representatives from Colorado-based BCG Economics LLC, Colorado State University-Pueblo, California-based Smart Cities Prevail and Illinois-based Midwest Policy Institute. “A fundamental problem with this assertion is that labor costs are a small share of total construction costs.”

The report, titled “The Cost of Repealing Michigan’s Prevailing Wage Policy: Impacts on Total Construction Costs and Economic Activity,” claims that for construction projects for which prevailing wage applies, the cost of labor and benefits account for only 20 percent of the total.

Furthermore, the report claims that repeal would result in 11,320 job losses in the state and a reduction of $1.70 billion in overall economic activity, or a .038 percent loss of overall GDP.

However, construction industry executives and many in the state’s GOP leadership couldn’t disagree more.

Norm Brady, president and CEO of the West Michigan chapter of the Associated Builders and Contractors (ABC), a pro-merit shop advocacy group, believes the repeal of prevailing wage would be a positive for the industry and the state in general.

“There’s nothing prevailing about Michigan’s prevailing wage rates,” Brady said. “To have (wages) artificially inflated on certain projects isn’t good for the industry.”

The construction industry is one that Brady and other stakeholders have been attempting to portray in a positive light in the hopes of attracting and training a new generation of workers.

When asked whether it’s beneficial to cut wages at a time when the industry is attempting to showcase itself as long-term career choice for those coming into the workforce, Brady cited average wages for the industry, which range between $45,000 and $48,000 annually.

According to May data from the Bureau of Labor Statistics, the average annual wage for production and nonsupervisory employees in the construction industry is actually above $51,000 per year. Wages and hours have remained steady in recent months.

As MiBiz has previously reported, the debate in Michigan over paying prevailing wage is loaded with voices on both sides, each armed with their own statistics and studies to support their claims. Adding to the controversy, Gov. Rick Snyder, known for supporting business-friendly policies, has stated repeatedly he does not support repealing the law.

Michigan has had a prevailing wage law in place since 1965, except for a nearly three-year period in the mid-1990s when it was suspended.

The authors of the aforementioned study, however, are unabashed in their belief that doing away with prevailing wage is not in the best interest of the state.

“Ultimately, the prevailing wage for publicly-financed construction projects is a positive overall economic development tool providing substantial benefits to workers, contractors, families and the overall economy,” the report’s authors stated. “Weakening or repealing Michigan’s prevailing wage law will not reduce the cost of public construction and is not in the best interest of taxpayers.”

Read 4626 times Last modified on Sunday, 28 June 2015 17:58

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