Michigan's Prevailing Wage

— Fri, 05/05/2017 - 10:43am

Michigan has had prevailing wage requirements since the Prevailing Wage Act was passed in 1965. There were two oft-mentioned reasons why this act was passed. Number one was to ensure that skilled Michigan workers would be paid a sufficient and competitive wage when working on public construction sites. Second was to ensure that contractors would not have an incentive to import unskilled or low-skilled workers who were willing to work for less than the standard wage (Michigan Prevailing Wage Act Purpose and History). This ensured properly trained contractors would be selected for State of Michigan jobs, and that they would be paid a competitive wage. The Prevailing Wage Act was passed with good intentions in a growing Michigan economy. It aimed to decrease worker exploitation, and was a common good effort to raise the standard of living in the state. The ultimate goal of prevailing wage was to give construction workers fair, standardized wages and benefits. Buildings like the Flint Bishop International Airport and the old Michigan State Police Headquarters were built using prevailing wage.

The Prevailing Wage Law covers construction workers employed on state financed or sponsored construction projects. The prevailing rates are chosen based on the region’s collective bargaining agreements. This essentially means that the State of Michigan must pay union wages to any workers currently employed on a state sponsored project. Each classification of worker gets a different prevailing wage depending on the union agreements in that region for a particular skill set. These wages include fringe benefits and overtime classifications (Prevailing Wage). Prevailing wage is determined and monitored by the Department of Licensing and Regulatory Affairs (LARA). Specifically, the Wage & Hour Division handles prevailing wage complaints and reports of underpayment. An investigator will be sent out to meet with the customer’s boss or company, evidence will be gathered to support or deny the claims of fraud, and a decision will be made. If the employee was being underpaid, then the company has the chance to voluntarily produce those wages for the employee. However, if the contractor refuses to pay the rest of the wages, a prosecuting attorney will be assigned the case. According to the U.S. Department of Labor, 29 other states have prevailing wage laws, but many of them have certain threshold amounts that only require prevailing wage above those set parameters.

Senate Bill 003 of the 2017-2018 session eliminates prevailing wage entirely. Senate Bills 001 and 002 eliminate the reference of prevailing wage in the school code and other areas of legislation. Sen. Arlan Meekhof (R-West Olive), Sen. Peter MacGregor (R-Rockford), and Sen. Dave Robertson (R-Grand Blanc) sponsored the bills. The bills have gained support throughout the legislature. These senators are portraying prevailing wage law as archaic and burdensome on the State. One argument posits that it creates artificially high costs for building schools and government facilities, and this works against job creation. A study by the Anderson Economic group found that the act cost Michigan taxpayers an average of $224 million per year on K-12 districts, community colleges, and public universities from 2002 to 2012 (Prevailing wage law should be repealed). In this fiscally constrained environment, many legislators and citizens believe that the State’s money could be better spent elsewhere. Another argument against Prevailing Wage is the large administrative burden it places on construction companies. Ingham County alone has hundreds of pay classifications based on the type of job, apprentice year, and the work schedule. Imagine having to completely restructure the pay scale for an entire construction company. So, not only does prevailing wage cost the state money, it also raises administrative costs for contractors.

There is another side to this argument. Proponents of the law believe that prevailing wage is a very large incentive for skilled trade jobs to move to Michigan. The law also helps make sure that skilled individuals end up working on public projects; this ensures quality workmanship and proper safety measures. Many people believe that prevailing wage is the fair wage. It allows individuals to provide for their families, and it ensures that the average worker is getting a fair deal for his or her skill set. Some other benefits of prevailing wage include a lower injury rate on job sites, a more educated and experienced workforce, more workforce training, and an increased rate of healthcare coverage. For those who wish to repeal the prevailing wage law it may be difficult during this legislative session. Governor Rick Snyder believes repealing the existing law would “hurt his ongoing push to expand the State’s skilled trades workforce.” (Oosting, Jonathan). Snyder would likely veto the bills if the legislature passes them, and there isn’t enough support for the laws to override a veto. Michigan Democrats have long fought against prevailing wage cuts on the premise of wage inequality. Sen. Curtis Hertel Jr. (D-East Lansing) severely opposes prevailing wage repeal: “Instead of trying to improve the situation, special interests are trying yet again for the right to pay workers less by getting rid of prevailing wage laws.” (Oosting, Jonathan)

It is easy to see the merits of the prevailing wage law but it does cost the State money. Projects for the private market are bid at a lower cost, and some companies won’t even apply for prevailing wage jobs because of the extra administrative burden. It can also be heavily abused on the jobsite. A common practice is for employers to bid prevailing wage jobs, pay their employees their standard wages, and then pocket the extra money to increase profit margins. This leads to the need for State oversight, which is an administrative cost for the State.

Works Cited

"Michigan Prevailing Wage Act Purpose and History." Michigan Building and Construction

Trades Council. Union Services Agency, 2013. Web. 27 Feb. 2017.

<http://www.michiganbuildingtrades.org/michigan-prevailing-wage-act-purpo...

history>.

Oosting, Jonathan. "Michigan Gov. Rick Snyder has 'serious problems' with prevailing wage

repeal bills." MLive.com. Mlive Media Group , 19 May 2015. Web. 27 Feb. 2017.

<http://www.mlive.com/lansing-

news/index.ssf/2015/05/michigan_gov_rick_snyder_has_s.html>.

Oosting, Jonathan. "Prevailing wage foes eyeing 'all options' for repeal." Detroit News. The

Detroit news , 19 Jan. 2017. Web. 20 Mar. 2017.

<http://www.detroitnews.com/story/news/local/michigan/2017/01/19/prevailing-