It is no secret that the Midwest is at the heart of the labor reform movement in our country. First, Gov. Scott Walker of Wisconsin signed comprehensive public-sector collective bargaining reform in 2011 – a move that has catapulted him to frontrunner status for the 2016 GOP nomination.
Then, Gov. Mitch Daniels, also a Republican, signed Indiana’s right-to-work law in early 2012, and that was quickly followed by passage of similar legislation in Michigan later that year. Wisconsin joined the fray once again this March to become the 25th right-to-work state in the country.
These are bold reforms that will have a great impact on the Midwest’s economy and the future of each state. However, lawmakers have signaled that they are not done just yet. In fact, Wisconsin and Michigan may be on the precipice of saving taxpayers hundreds of millions of dollars a year.
How might they do this, you ask? The simple repeal of an archaic law known as prevailing wage would save both states in excess of $200 million.
Currently, all states are covered under the federal Davis-Bacon Act, which requires a prevailing wage for federally funded projects. But 32 states, including Wisconsin and Michigan, have their own version of the law at the state level.
The laws require publicly funded projects – like building new roads or constructing a new school – to provide workers with a “prevailing wage.” Unfortunately, the laws are very complicated and cause private businesses more than a few headaches when bidding on a project.
In addition to being burdensome on the businesses that build our schools, roads and bridges, the wage rates are usually much higher than the typical wage rates in the area – essentially blocking local businesses from even submitting a bid.
In the Dairy State, the non-partisan Wisconsin Taxpayers Alliance (WISTAX) found that the state’s prevailing wage law artificially inflates labor costs by 45 percent. WISTAX estimates that labor costs make up 20 percent to 30 percent of the total project costs, which means Wisconsin taxpayers could save $200 to $300 million a year if the law is repealed.
The village of Grafton, Wisconsin, found out the unnecessary costs of prevailing wage the hard way. In 2011, it needed to contract with a company to repaint and maintain two water towers for a 14-year period. The village put out for competitive bids believing the project was not subject to the state’s prevailing wage law and accepted a bid of $712,183.
However, the state came in after the initial work had been done only to tell the village it was subject to the prevailing wage law. After an appeal from the village, the state finally ruled against Grafton in August 2014. The village had to pay a nearly $60,000 fine and an additional $308,000 in artificial wage increases – for no additional services whatsoever.
This kind of bureaucratic law does nothing to help public officials be good stewards of taxpayer money. If anything it does the exact opposite.
In Michigan, the savings just for school districts sit at $224 million per year, according to a 2013 study by the Anderson Economic Group.
Unfortunately for taxpayers, even though House and Senate Republicans have tried to make this a top priority in Michigan, Republican Gov. Rick Snyder has said he would not support a repeal of the law.
Luckily, Michigan’s neighbor to the west may side with taxpayers. Many Wisconsin legislators have shown their support for a full repeal of the prevailing wage law and Mr. Walker has signaled he may support such an idea.
“Well, there has got to be some sort of reform,” Mr. Walker told conservative radio host Charlie Sykes recently. “The question is: Do you go with the full enchilada at once or do you do a portion of it? And I think a lot will depend on where the votes are in the Senate and the Assembly.”
In both cases, taxpayers should be happy that lawmakers are at least talking about taking on these bold reforms that can save them money. The big question is: Will both states continue to shine as national leaders on labor reform, or will just one state be left holding the flag for taxpayers.
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