Prevailing Wage Act Harms the Poor

Michigan government continues to subsidize the highest paid workers in the state--construction workers on state projects--at a time when Lansing may slash welfare spending for the poor.

This tragic situation is the result of the state's so-called Prevailing Wage Act, which mandates that extra payments, above true average construction wages, be tacked onto the rates paid to construction workers on state-related projects. Michigan taxpayers probably spent almost $70 million in FY 1989-90 to make these extra payments and subsidize these workers who are already well paid on the free market.

The U.S. Department of Labor reports that the construction industry has the highest paid workers in Michigan, earning an average of $15.66 per hour in 1989, the last year for which data are available. The three construction categories rank first, third, and tenth for average hourly earnings among the 46 sub-industries tracked by the Michigan Employment Security Commission.

By contrast, workers in Michigan's retail industry, which has boomed during the last eight years, earn an average of $5.81-$8.31 per hour. This is one-third to one-half the wages in the construction industry where the subsidies are being sent.

Poor people on General Assistance receive an average monthly payment of $259, according to the state Department of Social Services. Based on a 40-hour work week, they earn an average annual wage of $1.49 per hour.

While everyone wants to be paid more, why should Lansing, through the Prevailing Wage Act, take the hard earned money of all taxpayers and use it to subsidize one small and already well-paid group? Is this fair public policy?

Far from a helping hand to those in need, the state Prevailing Wage Act is simply a reverse Robin Hood program, giving more to those who already have more. There simply is no "needy" involved at all here.

The Prevailing Wage Act deserves repeal. Short of that, there are a number of actions that lawmakers could take in the spirit of reform. Local school districts could be exempted from its costs so as to provide more money for education. Urban or rural areas where unemployment is highest could be exempted so the savings could spur new jobs. Social Services could be exempted so that more money is available for the poor. Prisons could be exempted so that the burden on taxpayers of keeping criminals locked up could be decreased.

Yet, the money that could be saved by repealing or modifying the Act is only the tip of the iceberg, because this program is only one of the many costs in the state's "hidden" budget.

In effect, the state has two budgets. One is on the table, in full view, and open to scrutiny. The second is under the table, hidden from view, inaccessible to the public, and even to elected officials. Yet the hidden budget costs the taxpayers millions upon millions of dollars each year.

To solve this problem, costs for hidden budget programs like the Prevailing Wage Act should be tracked and reported in the governor's annual budget. No new legislation should be voted on without first attaching a clear price tag. The Bureau of Employment Standards and the Department of Labor should adopt full disclosure, a sound public policy already in place in other departments like the MESC. These actions will make it harder to hide subsidies like the Prevailing Wage Act from public view.

At a time when our state faces hundreds of millions of dollars in budget cuts, setting priorities for the benefit of all citizens is essential. This cannot be done without full disclosure of state program costs. The governor and legislature should not be forced into making painful cuts, simply because we never stopped to find out what options we had for cutting hidden budget programs instead.

While liberals and conservatives may honestly disagree about where the axe should fall, they cannot possible do it in the dark. For if they do, both may find that in an effort to cut out the fat, they ended up severing an arm, a leg, or worse.

Here is an opportunity for both sides to unite, uncover the hidden budget, and create a budget that is both balanced and just. A good first step would be to repeal the costly Prevailing Wage Act so that we can more firmly extend a helping hand to those in need.