Expanding Lansing’s Prevailing Wage Would Reduce Jobs, Hike Cost to Taxpayers

Economic impact could be “severe,” says Mackinac Center labor policy director

For Immediate Release
Monday, Oct. 15, 2007

Contact: Paul Kersey
Director of Labor Policy

MIDLAND — Expanding the prevailing wage requirement in the city of Lansing would likely increase the cost of construction while reducing the number of construction jobs, according to the author of a recent Mackinac Center for Public Policy study on the state’s prevailing wage law. News reports indicate that the Lansing City Council at its Monday meeting may begin consideration of a new ordinance that would impose a prevailing wage requirement on private construction projects — such as the “Stadium District” — receiving city subsidies or tax abatements. The city’s existing ordinance requires construction firms on city government projects to pay the prevailing wage — usually the union wage — to workers.

Paul Kersey, director of labor policy for the Mackinac Center, warns that the proposed ordinance could have severe consequences for Lansing’s economy. “Our research on prevailing wage laws indicates that they increase the cost of construction by 10 to 15 percent,” Kersey said. “Prevailing wage laws tend to reduce job creation in the construction industry, and the benefits tend to go mainly toward workers who receive above average wages. What effect this ordinance will have on Lansing will depend on the details, but I have no reason to believe that an expansion of the prevailing wage would produce different results. The only question is how severe the economic impact will be and that depends on just how much private construction is covered.”

According to the Bureau of Labor Statistics, median wages for all construction workers in the Lansing area were $20.03 per hour in 2006, compared to a median of $16.58 per hour for all workers in the Lansing area.

Kersey’s study is available on the Web at www.mackinac.org/8907.