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Friday, 08 June 2018 14:11

Construction execs sound off on prevailing wage repeal

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Construction executives in West Michigan — known for its concentration of “merit shops” — generally speak favorably of the recent repeal of the state’s prevailing wage law.

The more than 50-year-old state law that mandated union-level wages for public-sector construction jobs had been the target of both the state’s GOP and pro-merit shop construction groups for years, and was repealed by Republican-led legislature on Wednesday.

The action cannot be vetoed by Gov. Rick Snyder, who had opposed prior repeal efforts over fears of what it might do to workforce development initiatives.

But construction executives in Grand Rapids say they have no fears that prevailing wage repeal will hamper skilled trades training. Rather, the repeal will have a positive impact on construction costs, according to industry sources.

“As a part of our business, anytime it’s not a market-determined wage, there is a cost and it’s documentable to the project when someone comes in and says, ‘this will be the minimum,’” said Josh Szymanski, chief strategy officer at Owen-Ames-Kimball Co. (OAK).

The Grand Rapids-based general contractor performs considerable work in the government sector as well in public schools, for which about 60 percent of the work has been performed under prevailing wage, Szymanski said.

Szymanski also noted that given the current construction boom, market-level wages for some trades — such as mechanical, electrical and plumbing — have met or exceeded the mandated prevailing wage in some cases.

The issue with prevailing wage, according to industry sources, is the myriad levels of classifications for different skills, which created additional levels of reporting and cost.

Under the law, each county in Michigan set its own prevailing wage rate for different jobs.

“We’re a fan of anything where the market is allowed to work on its own and we don’t see any detriment to (the repeal) in our industry,” Szymanski said. “It’s all positive for our government and school clients. They should save a few dollars and let the market work.”

That sentiment was echoed by Chris Beckering, vice president of strategic business operations for Pioneer Construction Co.

“(The repeal of prevailing wage) means there are more state-funded projects that we’ll have an active interest in pursuing,” Beckering said. “Prevailing wage creates an additional administrative and reporting burden. (The repeal) makes our bids more competitive and results in savings to taxpayers.”

Long viewed as a hot-button issue, prevailing wage has enjoyed less support in West Michigan compared to other areas of the state where there’s a heavier concentration of union shops.

With the repeal, Michigan joins 22 other states around the country without a prevailing wage law, according to the U.S. Department of Labor.

While many contractors believe there will be a cost-savings to taxpayers as a result of repealing prevailing wage, there’s also evidence to the contrary.

A January report by the Midwest Economic Policy Institute found the 2015 repeal of Indiana’s prevailing wage law resulted in little to no cost savings on publicly-funded construction projects. Meanwhile, construction wages have decreased between 8.5 and 15 percent, depending on the level of skilled workers, according to the report.

Statistics like that are disheartening to to supporters of the law like Damian Hill, president of the Associated General Contractors of Michigan, a Lansing-based construction trade industry which favors the prevailing wage law.

“I’m not surprised, but I’m disappointed,” Hill said, noting that his organization had been fighting to keep the law in place for the last three years — which MiBiz has previously reported.

Supporters of prevailing wage note the brief 1990s repeal of the law and the related negative consequences.

While the repeal of the law remains very fresh, Hill wouldn’t rule out measures to bring it back.

“This battle may be over, but the war isn’t over,” Hill said. “Depending on the impact on the industry and certainly if what we think is going to happen happens, we don’t think that’s good for Michigan’s construction industry. We would try and figure out a way to have the law reinstated. What form that takes and how that comes together, it’s way too early in the process.”

Read 2713 times Last modified on Sunday, 10 June 2018 20:45