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House of Representatives
Session of 2017 - 2018 Regular Session


Posted: January 20, 2017 02:52 PM
From: Representative Stephen Bloom
To: All House members
Subject: Prevailing Wage Reform - The Competitive Wage Initiative (Previously HB 1095 of 2013-14 Session)

I will be re-introducing legislation (previous HB 1095 of 2013-14 Session) which would place a three-year moratorium on the state Prevailing Wage Act.

The Prevailing Wage Act requires that all public bodies pay the prevailing minimum wage, as determined by the Secretary of Labor and Industry, to workmen on a “public works project”. A “public work” is defined in the Act as any construction, repair, demolition, or alteration paid for in whole (or in part) out of the funds of a public body where the total estimated cost exceeds $25,000. It is important to note that the general prevailing wage threshold has not changed since the Kennedy Administration and that there is no cost-of-living adjustment (COLA) for the threshold in current law. At today’s cost levels, the $25,000 prevailing wage threshold virtually applies to every infrastructure project (with the exception of certain locally funded bridge and road projects, for which the threshold has been increased to $100,000).

In the meantime, cost-of- living has increased sevenfold, public construction costs have skyrocketed, and our local government organizations are struggling to keep costs down, keep property taxes under control, and balance their budgets. A temporary repeal of the prevailing wage mandate will incentivize local government organizations to undertake building projects, thus stimulating the local economy and reducing the financial burden on taxpayers throughout the Commonwealth.

It is important to note that Michigan experienced a 30 month court-ordered moratorium of their prevailing wage law beginning December 1994. Dr. Richard Vedder, distinguished professor of Economics at Ohio University, studied the effects of the 30 month moratorium in Michigan in the 1990s. His study concluded:
• Prevailing wages were 30%-40% higher than market wage.
• There was no reliable evidence that labor productivity changes absent of prevailing wage.
• Prevailing wage actually reduced employment in the construction industry as 11,000 new jobs were added during the suspension.
• State and local governments saved a total of $275 million due to the absence of the prevailing wage mandate.

A follow-up 2007 study issued by the Mackinac Center for Public Policy estimated that Michigan’s prevailing wage law increased the cost of public projects anywhere from 10% - 15%, and repeal of the law would have saved taxpayers $216 million in the year 2002.

My proposed Competitive Wage Initiative will stimulate local economies, and prove once and for all that the antiquated and onerous prevailing wage mandate has outlived its efficacy.

Previous Cosponsors: Kauffman, Rapp, Cutler, Hickernell, Aument, Cox, Tallman, F. Keller, Swanger, Rock, Moul, Grove, Lawrence, R. Miller, Regan, M. K. Keller, Gingrich, Everett, Marsico, Mentzer, Dunbar, Saylor, Saccone, Metcalfe, Delozier, Helm, Maloney, James and Denlinger

Introduced as HB1225