Difficulties for Bidders

Michigan’s prevailing wage law has had other significant effects on the process of public construction. The practice of the state’s Wage and Hour Division is to use union work classifications to create prevailing wage scales. This is a reasonable step in light of the law’s requirements, but one that has the effect of imposing not only union wages, but also union work classifications on nonunion contractors that bid on and win public construction contracts. The finely detailed classifications will often be unfamiliar to nonunion contractors, especially smaller companies that rely less on specialization. A typical prevailing wage determination from the WHD may list more than 100 different work categories. Categories can be very detailed: Crane operators can be paid any of five separate rates depending on the length of the crane’s boom and jib; laborers’ pay can vary depending on how far outside the building they are working.[50] By contrast, wage reports for nonunion companies typically list only 30 occupations.*

Apprehension about possible legal liability from inadvertent violations may lead some nonunion contractors to forgo bidding on public construction. These contractors would be at risk of misapplying union categories with which they are unfamiliar, and even if they understand those categories, their own practices might not align with the union standards imposed by Michigan’s prevailing wage. In such situations, potential legal liability would lead contractors to place workers in higher-paying work classifications. Some contractors would adjust their bids upward to account for this risk; others might forgo bidding on government contracts, reducing competition. Either way, taxpayers would bear the increased cost of government construction.

The Ohio report cited earlier also found that some nonunion contractors had concerns about the effect that widely differing wage scales might have on employee morale: Workers might perceive favoritism in assignments to more lucrative government contracts, or they might react negatively when returning from union-scale public work back to market-wage work for a private-sector customer.[51] The Ohio report indicated that prevailing wage laws tend to reduce the number of bidders on public construction, increasing the cost to taxpayers.[52]

* See, for instance, PAS Inc., Merit Shop Reports or BLS Occupational Employment Survey.