Michigan becomes latest Illinois neighbor to repeal prevailing wage mandate
Michigan nixed a law mandating inflated wages for public construction projects. The Prairie State should follow suit.
The Michigan Legislature repealed the state’s prevailing wage law June 6. The change will not require Gov. Rick Snyder’s signature, as a taxpayer advocacy group collected more than 260,000 signatures from Michigan voters to put the issue before state lawmakers, according to the Detroit Free Press.
Prevailing wage laws often mandate higher wages for workers on government construction projects than their private-sector counterparts. In Illinois, the state’s prevailing wage law has hiked costs for taxpayers while destroying job opportunities in the construction industry.
While a majority of states currently have prevailing wage laws on the books, many of Illinois’ neighbors have been scrapping such laws in recent years. Indiana repealed its prevailing wage law in 2015, Kentucky followed suit in 2017 and Wisconsin repealed its prevailing wage law for local projects effective in 2017. The Missouri General Assembly in May passed a prevailing wage reform bill that awaits the governor’s signature. Among other reforms, the bill would exempt public projects projected to cost under $75,000 from the prevailing wage mandate. Meanwhile, Iowa hasn’t needed to reform or repeal its prevailing wage law, as the state never implemented one in the first place.
Prevailing wages in the United States originated in 1931 with the passing of the Davis-Bacon Act, a federal law mandating contractors give fringe benefits and baseline wages to employees working on federal construction projects of over $2,000. In theory, the baseline wages are supposed to mirror the common market wages. In practice, however, faulty calculation techniques criticized by the Inspector General and Government Accountability Office have resulted in the baseline wage for federal construction projects to be on average 22 percent higher than market wages.
After the passage of Davis-Bacon, many states followed the lead of the federal government and passed their own prevailing wage laws, often setting inflated baseline wages for state and local construction projects. Illinois’ prevailing wage rates are approximately 37 percent higher than average market wage rates.
Given prevailing wage laws essentially operate as shields for unions against competitors, some have argued the laws were crafted with racist intentions to advantage majority-white union workers over majority-black nonunion workers. Economic literature on the subject seems to lend some credence to the idea that prevailing wages create racial disparities, as repeals of prevailing wage laws in some states have narrowed wage gaps between black and white construction workers.
Prevailing wage laws hurt overall employment in the construction sector. According to Illinois Policy Institute research, had Illinois repealed its Prevailing Wage Act in 2005, the state would have seen a 7.9 percent increase in construction sector jobs in 2015, translating to over 14,000 new jobs. Prevailing wages ensure that a smaller number of highly paid union workers are secured jobs at the cost of shutting out opportunities for the many nonunion workers willing to work for market wages. Ditching prevailing wages means lowering the cost of business for public projects, leading to more development and more jobs.
Prevailing wages are outdated and depress construction employment in a state that’s desperately in need of jobs growth. Illinois should take a hint from its neighboring states and reform its prevailing wage law.