Another Perspective: Prevailing Wages and the Larger Work Force

Under the state prevailing wage law, the workers receiving the biggest boosts are not necessarily those with the greatest need. For example, consider the city of Detroit’s "living wage," which is intended to ensure that low-skilled workers are not exploited in the course of city business. In 2006, companies and nonprofits doing business with the city were required to pay all employees working on city business — not just construction — a minimum of $12.50 per hour,* which was 25 percent more than the amount that a full-time worker would need to meet the federal poverty line for a family of four.[35] By comparison, construction laborers — workers in one of the least-skilled occupations in the construction industry — at nonunion contractors in the Detroit area received an average base wage (including benefits) of $19.60 per hour, 56.8 percent higher than the Detroit living wage. Electricians at nonunion firms had an average hourly wage of $30.83, better than twice Detroit’s living wage.[36]

Michigan’s prevailing wage law boosts these wages, already well above poverty level, even higher: Class I (underground) Laborers, one of the lower-paid categories of laborers, received $31.54 per hour on state-supported construction in Wayne County in 2006, more than 2.5 times Detroit’s living wage, while electricians received a minimum of $44.37 per hour, more than 3.5 times Detroit’s living wage.[37]

The BLS estimates that in 2005 the median wage for all workers in the metropolitan Detroit area (including both hourly and salaried employees) worked out to $17.72 per hour.[38] Again, this figure does not include fringe benefits, and again, assuming that fringe benefits are worth 30 percent of straight wages, we estimate total wages and benefits of $23.04 per hour.[39] In 2005, the Michigan Wage and Hour Division’s prevailing wage determinations for Wayne County listed 118 separate wage categories, of which only two were compensated at less than $23.04 per hour. Sixty-four classes of workers would have received hourly pay and fringe benefits in excess of $40 per hour. Working full time for 50 weeks per year on state-supported construction — but without working overtime — these workers would have received state-mandated compensation in excess of $80,000 per year.

Michigan’s construction work force, overall, is fairly well paid. In 2006, the median wage for construction workers, including both union and nonunion workers across the state, was $20.31 per hour (excluding fringe benefits) — 28.1 percent higher than the median wage of $15.86 for all workers in Michigan.**[40] Even if one believes that government should take active steps to redistribute income to low-wage workers, in most cases this is not what Michigan’s prevailing wage law does. To the contrary, the prevailing wage law generally mandates large pay increases to workers who frequently would earn above-average wages without any government intervention.

* As of 2006, this figure was the required "living wage" for employees who do not receive health care benefits. Workers who receive sufficient health care benefits as defined by the Detroit ordinance could have received a wage as low as $10.00 per hour.

While the prevailing wage law mandates compensation in excess of $40 per hour for most categories of construction workers, it is not necessarily the case that this figure applies to a majority of Wayne County construction workers.

** These BLS figures include work performed under the state prevailing wage law. However, state and local government construction only amounted to approximately 15 percent of total construction in Michigan in 2002, and not all of this government-supported construction would have been covered by the prevailing wage statute. Average non-union wages found by PAS also compare favorably with the average wage for all workers in the state. Given the limited amount of construction subject to the prevailing wage law, it is very likely that construction workers would have earned more than the BLS median wage even in the absence of the prevailing wage law.