Here & Now

Contractor Groups Split On Prevailing Wage Repeal

Frederica Freyberg:

Legislators who want to repeal the so-called “prevailing wage” standards are talking about trying to tuck the measure into the state budget. Prevailing wage requires workers on government projects to earn state-mandated wages. It’s a 80-year-old law designed to prevent lower-paying, out-of-state companies from underbidding on public construction and road projects. State contractors are split on whether to repeal prevailing wage. We spoke with both sides, starting with associated builders and contractors of Wisconsin, which commissioned a study from the Wisconsin Taxpayers Alliance that found repealing the law would save governments in the state $200 to $300 million a year. We asked the group’s president, John Mielke, about the effort to repeal the prevailing wage law.

John Mielke:

I think it’s good for the taxpayers of Wisconsin and that was the idea behind commissioning the study. Our members do prevailing wage and private construction work, so they’re operating in both worlds. They saw some weird things happening in prevailing wage. We knew it was inflating the cost of public construction. But we wanted to find a nonpartisan group that was respected to kind of look at that question and tell us to what degree that had an impact on public construction. That’s what the survey found, that they were inflating rates and the rates weren’t often reflecting local market rates.

Frederica Freyberg:

Is the point of repealing prevailing wage to lower wages? That would seem to be the point.

John Mielke:

To the extent you’re paying higher than you should be, taxpayers are paying more than they should. That’s what the studies found. Those rural counties are often paying wage rates that you find in urban counties. They found in Florence County, for example, they’re paying the same prevailing wage rate for carpenters as in Dane County. We know of cost of living is lower in Florence County. That puts a burden on taxpayers.

Frederica Freyberg:

What about the argument that if you don’t pay the prevailing wage it could hinder quality and productivity because you would be getting lesser trades people?

John Mielke:

Right. So 80% of the construction put in place in the state of Wisconsin is not done under the prevailing wage law. It’s done in the private marketplace. And we honor top projects, as does the industry. So I just brought along these. But the Daily Reporter, 2013, top projects and our projects of distinction, the vast majority are not prevailing wage projects. They’re private construction work projects. Prevailing wage are the anomaly. We see quality construction in the private market every day.

Frederica Freyberg:

Another thing that is kind of confusing is the Wisconsin Legislative Bureau Fiscal Report that basically concludes that the impact on costs due to prevailing wage loss is not statistically significant. So what’s that about?

John Mielke:

They look at the literature out there and some studies say you’ll save money. There’s some that say that you won’t. Why the Taxpayer Alliance study is different is it looks at our methodology. It doesn’t look at is prevailing wage good or bad. It looks at how do we calculate it and does it reflect market rates. It found it doesn’t reflect market rate and there are significant flaws in the way that we select data.

Frederica Freyberg:

You don’t think if prevailing wage laws were repealed that it would be difficult to find high-quality workers?

John Mielke:

Not at all. First of all, many companies do prevailing wage work. The opposite is true. There are many who participate in the Apprenticeship program who never go near public works. We have 1,000 apprentices in our program. So we’re training in 12 different trades across the state. We’re committed to training. Not all of those contractors do prevailing wage. So the connection between prevailing wage and training is maybe not as direct as some would like you to believe.

Frederica Freyberg:

How burdensome is the prevailing wage law for contractors to comply with?

John Mielke:

It’s very burdensome. If you take into consideration that we talk about prevailing wage like it’s a singular thing. The state issues wages in 200 classifications for each County and in five different job times. So you’ve got 200 times 72 times five. That’s how many prevailing wages there are in Wisconsin. If you have an individual working in three different trade classifications in a day, that’s three different wage rates and benefit packages. If you had them working in two counties, you multiply that by two. If you get a crew of five people, it becomes a regulatory burden and a nightmare to comply with it. So even when you’re trying hard to comply, the regulations are thick and burdensome.

Frederica Freyberg:

On the other side of the proposal to repeal the prevailing wage law in Wisconsin, a group of 450 contractors that want to keep it on the books. John Gard represents them as President of Wisconsin Independent Businesses. We started by asking him why they oppose repeal.

John Gard:

Productivity is a key measurement to keeping costs down in construction, and if you want to have exceptionally productive work sites and exceptionally productive workers, you have to find the most highly-skilled, the most motivated and the most ready-to-work people. And Wisconsin has the most highly-skilled construction workers in America. Our per-mile highway construction costs are among the lowest. Productivity is the third highest in America. The workers pay for their own training. They have a great relationship with the contractors because they understand in order to be fiercely competitive, you have to be exceptionally productive. And that’s where you find savings in construction.

Frederica Freyberg:

But wouldn’t repealing the prevailing wage reduce the costs for bids because you’d presumably reduce the wages and then save the state money, which is apparently the entire point of these bills?

John Gard:

Every study — well, let’s put it this way. The Legislative Fiscal Bureau came out with their analysis, who I believe is the most credible messenger on all budget-related items and they said we’re going to assign no savings to this because you can’t determine. There are studies on both sides. Some can say you can save money. Others say you can’t. We believe the study that came out this week was so incredibly flawed, it’s not real. But the most important thing, again, back to construction, is productivity. You have to have a motivated people who are committed to improving their skills to deliver high-quality, very complicated construction on time and under budget. That’s where we save taxpayers money. If you erode that system, taxpayers are ultimately going to pay more. And numerous studies have shown in states where they had prevailing wage and got rid of it and re-instituted it again, there was no difference in the per-square-foot bid cost, so there was no savings generated, which is why we believe this is the — the numbers are a mirage that people talk about.

Frederica Freyberg:

And the study that you referenced is a study that the authors of this bill in both the Senate and Assembly look at and it says that it would save maybe $200 to $300 million in government costs in a year.

John Gard:

Yeah. And it’s just fictitious. They created a math equation that was seeking to get a conclusion and they fudged the numbers. They said it’s zero.

Frederica Freyberg:

What’s the motivation on the part of the bill’s authors?

John Gard:

You have to believe people want to drive down wages. I mean, there are some really awesome people who will support this bill and that’s great. They believe that they can save money. We believe they will cost money in the long run by lower productivity. Just look at other states. How is it in Wisconsin we can have the third lowest cost per mile in building a road in one of the most difficult climate states and we have prevailing wages? It’s because we understand the challenge in America today is attracting skilled, motivated workers. Any other great business group will talk about skilled, motivated workers are short supply. And in construction, the second fastest-growing part of the economy, you have got to give them motivation to come here. You know how hard it is to get a 25-year-old man to get into the world of construction where you’re working in below zero temperatures building Bridges in January? You’ve got to pay them well.

Frederica Freyberg:

So your contractors would rather pay more for those skills than pay less for something less.

John Gard:

I believe the relationship in Wisconsin is that you get — taxpayers get the best deal by having the most productive workers. And that’s the magic of what happens in Wisconsin right now. Iowa doesn’t have prevailing wage. Our per-mile cost for roads is less than it is in Iowa. It’s very important for us to stay focused on skilled workers are the greatest thing in demand in America today and it’s no different in Wisconsin.