The billion-dollar government mandate you probably haven’t heard about

OPINION:

A top-down government-imposed mandate is costing billions of wasted tax dollars a year and lost opportunities for workers while disproportionately harming minorities. It’s called “prevailing wage,” and you may not have even heard of it if you don’t work in the construction industry.

Prevailing wage laws at the federal, state and local levels, which require private contractors that bid on public works projects to follow complicated, ever-changing compensation schedules produced by the Department of Labor, are often portrayed as measures to ensure fair wages for construction workers. That was the narrative behind the Biden administration’s misguided attempt to significantly expand the reach of the federal prevailing wage law — until a court struck down the administration’s move last month as unlawful.

Here’s what these laws’ proponents don’t tell you: Nearly a century of data reveals these mandates hurt the people they’re supposed to help. Fortunately, defeating these misguided regulations isn’t just possible — it’s a much-needed step in the fight for economic liberty and government accountability.

That’s why it was such welcome news when an Arizona court struck down recently enacted prevailing wage ordinances in Phoenix and Tucson last month. The decision came after the Goldwater Institute, where I work, sued Phoenix and Tucson on behalf of dozens of businesses. The court held that these ordinances were illegal under a state law prohibiting cities and towns from saddling public works contractors with “prevailing wage” requirements.

Paying workers a fair wage isn’t the problem: Construction workers today are earning more than ever, with construction wages rising nationwide at rates that outpace the entire private sector average. Instead, under the guise of benefiting workers, these wrongheaded mandates hurt workers and business owners alike by smuggling in bureaucratic red tape, compliance costs and penalties (including hefty fines, legal fees and even prison sentences) for violations.

All this benefits politically entrenched labor unions by eliminating their competition.

But as decades of data show, prevailing wage laws hurt everyone else. They’re notoriously difficult to implement in the field, forcing contractors to painstakingly track and classify employees’ tasks (for example, paying a general laborer as a “carpenter” if he hammers a nail that day). They hurt employees, particularly entry-level ones, by making hiring workers punitively expensive and complicated. The brunt of it falls disproportionately on minorities, immigrants, younger workers, women, veterans and small businesses. They also cost taxpayers more by excluding qualified businesses from competing for public works contracts and driving up costs (not only payrolls but also compliance costs) for those that remain.

Striking down Phoenix’s prevailing wage law will save taxpayers nearly $100 million, based on the city’s own estimates. It will also ensure a level playing field for all workers and businesses, particularly those that can’t afford to pay the higher compliance costs or navigate the bureaucracy that this mandate would have created.

The fight is far from over: Dozens of states and localities still have prevailing wage measures despite a mountain of research and experience exposing their true effects. Meanwhile, federal bureaucrats are now trying to embed another prevailing wage mandate into clean energy projects.

But our victory in Arizona shows a path forward.

Bloated government, wasteful spending and stifling bureaucracy are not inevitable. There is a better way for taxpayers, business owners and workers alike — if we’re just willing to fight for it.

• John Thorpe is a staff attorney at the Goldwater Institute.