How Wage Mandates Are Determined

The statute does not define a prevailing wage, nor does it provide any guidance as to which specialties or trades among construction workers are to be recognized and issued a separate prevailing wage, but it does specify that the determination of prevailing rates is to be based on "collective agreements or understandings between bona fide organizations of construction mechanics and their employers" — in other words, union rates.[7]

The WHD determines prevailing wages on a county basis, using collective bargaining agreements submitted by local unions.* According to officials at the WHD, these rates were originally updated every 18 months, but in recent years updating prevailing wage schedules has become a constant process — wage schedules are updated whenever a union submits a new collective bargaining agreement.[8] "Master contracts," involving all the employers in a region of the state, determine many of the rates; frequently one master contract will cover all unionized workers in a craft in a given county.[9] Where more than one contract may apply, the WHD will use a straight average of the rates contained in the contracts.

Contractors and interested third parties may submit complaints to the Wage and Hour Division if they believe that a rate is inaccurate, but according to officials at the WHD, there is no formal process for evaluating these complaints. The state does not take any other measures, such as examining payrolls of contractors to confirm that the rates listed are actually paid, or otherwise verifying the accuracy of the rates and terms of employment contained in the collective bargaining agreements submitted by unions.[10] There are several ways that inaccuracies could occur: Unions could allow employers to skimp on fringe benefits, allow workers to be put in a work classification receiving lower wages than they would otherwise be entitled to, or offer employers special wage reductions on certain projects that are not reflected in the collective bargaining agreements that are sent to the state. One particular problem area may be in specialized crafts — road construction in particular — for which government agencies are likely to be the main customer. In extreme cases there could in fact be no private market and hence no need for either unions or employers to consider what effect wage rates might have on private-sector customers. Union officials will understandably want to set wages as high as possible, and employers will have little incentive to oppose them as long as these costs can be passed along to the state. Because the state is required by law to pay whatever rate appears in collective bargaining agreements, wage rates would effectively be determined by employers and union officials. In the absence of market competition, these rates are likely to be arbitrary from an economic point of view. The state’s failure to verify that the rates found in union collective bargaining agreements are actually enforced in the private sector leaves the state vulnerable to fraud.

* Much of the process for determining Michigan’s prevailing wage rates is not detailed in written regulations, particularly how a specific prevailing wage rate is determined once the relevant collective bargaining agreements have been gathered by WHD officials.