Prevailing Wage Law

The state's Prevailing Wage law, modeled after the federal Davis-Bacon Act, should be statutorily repealed, and the Legislature should place limits on the ability of local governments to impose such rules. The courts have recently struck down the state law but the Legislature needs to finish the job as part of any gas tax increase that might be necessary. Professor Gary Wolfram of Hillsdale College estimates that repeal of the state law could save 35% on the wage component of many construction projects, although significant savings in actual construction outlays will require repeal of the federal Davis-Bacon Act as well.44

Potential savings from removal of the state law would affect primarily local capital outlay projects, where there is less likelihood of federal funds being involved, and where local governments are most likely to be contracting out work. If one assumes that half of the $186.6 million in local capital outlay projects in 1992 were contracted out, and that wages represented 20.6% of costs, then $19.2 million in wages would be subject to increased competition.45 If Professor Wolfram's savings estimate of 35% is used, a cost savings of $6.72 million per year would be possible on the local system, or. 15 cents per gallon.