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Sunday, 11 October 2015 20:55

Contractors split over prevailing wage repeal

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Stakeholders in Michigan’s construction industry remain starkly divided in the debate over repealing the state’s prevailing wage law.

Many executives in the skilled trades sector are concerned about having access to a trained workforce at a time of high demand for new construction. Industry insiders who oppose the current repeal effort believe that the law, which mandates union-level wages on all state-funded construction projects, allows the most skilled workers to receive the highest possible wage.

On the other hand, supporters of the repeal contend that paying prevailing wage artificially inflates construction costs, wastes taxpayer money and creates unnecessary red tape for contractors.

While prevailing wage often is framed as a union concern, contractors opposed to repeal tell MiBiz they don’t see the issue as one of union contractors versus their nonunion counterparts. Rather, the prevailing wage law ensures workers receive fair pay and it helps companies maintain a skilled workforce, said John Banks, president of Motor Shop Electrical Construction Co., a Battle Creek-based electrical contractor.

“Prevailing wage is an important part of how we do business,” Banks said. “Our training of people is above and beyond. It’s not a union-versus-nonunion issue. It’s a matter of making sure that people are making a living wage on these projects. Michigan is in the throes of a skilled trades shortage, and people are leaving because they can do better elsewhere.”

Michigan’s prevailing wage law has been in effect since 1965, except for an nearly three-year period in the mid 1990s when the law was repealed temporarily.

Mike Stobak says he remembers what happened the last time the state got rid of prevailing wage. The vice president at Barton Malow Co., a Southfield-based general contractor, told MiBiz that although construction costs initially went down after the previous repeal, within six months they had returned to their former levels. While Stobak was unable to point to evidence of what caused the costs to rise, he said the present market with its high demand for construction and a low supply of workers mirrors the conditions that preceded the last repeal.

Barton Malow works on a variety of highly competitive public projects that are subject to the state’s prevailing wage law.

“These are buildings that our kids use, and you want top-tier, top-skilled craftsmen building these buildings,” Stobak said of Barton Malow’s work on K-12 schools. “It’s kind of the old joke (that) the low bid isn’t always the best bid. So when people are talking about the savings, I don’t agree that the savings are there the way they tout they are.”

In the mid 1990s, many contractors tended to scale back the number of experienced workers they placed on job sites to cut costs, Stobak said. He said he’s concerned that a return to those habits could have a chilling effect on the industry.

“Bidding public work became all about price,” he said of the period. “You may have six journeymen and four apprentices (with prevailing wage). … If it becomes all about price, people start putting one journeymen and nine apprentices (on a job site). Any sane person looking at that can tell you that (having fewer) qualified people working on those projects (will lead) to productivity and quality issues. Not that they are not working hard, they’re just not as skilled as a trained journeyman that has been in the trades for 10 or 15 years.”


DUELING DATA

Those on both sides of the prevailing wage debate have no shortage of economic impact studies and statistics to support their claims.

As MiBiz reported in June, a report from from Colorado-based BCG Economics LLC, Colorado State University-Pueblo, California-based Smart Cities Prevail and Illinois-based Midwest Policy Institute noted the overall economic downside to repealing prevailing wage.

“The belief that reducing wages will reduce costs is based on an incomplete understanding of the construction industry,” the report said. “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 repeal would result in 11,320 job losses in the state and a reduction of $1.70 billion in overall economic activity, or a loss of .038 percent of Michigan’s overall GDP.

On the other hand, supporters of the repeal say that getting rid of prevailing wage would cut down on unnecessary costs, assist in creating jobs and get rid of red tape.

The push to repeal prevailing wage comes predominantly from the Michigan chapter of the Associated Builders and Contractors (ABC), a Lansing-based pro-merit shop construction industry trade group, and its affiliate, Protecting Michigan Taxpayers. Last month, the group turned in more than 390,000 signatures in support of repealing prevailing wage through either a ballot initiative or the state Legislature.

The legislature could vote to repeal the law and it would not require a signature from Gov. Rick Snyder, who opposes repealing prevailing wage. If the legislature fails to approve the initiative, the issue would then go before voters on the statewide ballot in November 2016.

“We’re working hard to build skilled trades education so Michigan has as a talented workforce with in-demand skills,” wrote Dave Murray, Snyder’s deputy press secretary, in an email to MiBiz. “Such a workforce is a factor when companies look for places to locate or expand, and we don’t want to do anything that could hamper those efforts which lead to the creation of more and better jobs.”


WHO DECIDES?

Those who oppose repeal, including Banks and Stobak, say they would prefer the issue be put directly before voters.

“Let the voters decide,” Banks said. “If they want to decide, we’ll live with the consequences.”

Norm Brady, president and CEO of ABC’s Western Michigan chapter, told MiBiz he’d prefer the legislature to handle the prevailing wage issue as opposed to voters.

“I think that’s why we have government,” he said. “I think that is why they are there.”

Whether the law actually gets repealed remains up in the air, as some legislative Republicans, like Snyder, have distanced themselves from the issue. Moreover, groups have unsuccessfully attempted to repeal prevailing wage since the law was brought back about two decades ago, as MiBiz reported in March.

Meanwhile, a poll released in early October by Lansing-based Marketing Resource Group Inc. found that 45 percent of state residents support repeal, 39 percent oppose it and 16 percent are undecided. Additionally, 39 percent of union households supported repeal.

“The efforts to repeal the prevailing wage law, if left to a vote of the people, faces an up-hill battle,” MRG President Tom Shields said in a statement announcing the findings. “The rule of thumb is that ballot proposals need 60 percent support to survive general election campaigns. What’s interesting, however, is the relatively low levels of opposition among union households. With public trust in government at an all-time low, workers are not convinced the state knows best.”

Read 4049 times Last modified on Monday, 12 October 2015 12:39

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