New Bang for a Michigan Buck
The state will save $400 million a year with its prevailing-wage reform.
A car drives by a pothole in Detroit. Photo: Carlos Osorio/Associated Press
By The Editorial Board
June 10, 2018 4:12 p.m. ET
In Michigan the roads are so bad they’re a joke on social media. “BREAKING NEWS: lost city of atlantis found in detroit pothole,” local YouTube star Demetrius Harmon quipped on Twitter in February, garnering thousands of likes. “I don’t always dodge potholes,” another Michigan meme says, “but when I do, I hit four more.”
So it’s a big deal that last week lawmakers passed a reform that will save taxpayers 10% to 15% by repealing the state’s prevailing-wage law for construction on roads, buildings and other public works. That law, passed in 1965, mandated that contractors pay union wage rates even if non-union workers could do the job for less. Some 27 other states have such laws, which let unionized contractors keep their bids high and still win government contracts. Non-union workers account for nearly 80% of Michigan’s construction industry and dominate private building.
The Michigan law was especially onerous, outlining some 500,000 classifications of construction jobs and corresponding pay. This can mean that a contractor must pay one hourly rate for a worker for installing drywall but a different rate for painting. The rules deterred small businesses from bidding for government business and added costs when they did.
In 2014 Steve Zurcher, owner of St. George Glass & Window, won a contract to do work on Michigan Technological University’s new welcome center. At the time Mr. Zurcher’s glaziers normally earned $20 an hour. But because this was a public project, he had to pay the prevailing wage of $43.35. He raised his bid, but that cost taxpayers an additional $12,000.
The Mackinac Center estimates that the prevailing-wage mandate has added about $400 million a year to the cost of roads, buildings and other public works in Michigan. The Wolverine State will now have a lot more money to fill those potholes.
Appeared in the June 11, 2018, print edition.