Michigan Prevailing Wage Act Purpose and History

Michigan’s Prevailing Wage Act became law in 1965.  Like the provisions of its federal counterpart, the Davis-Bacon Act, the prevailing wage was enacted for two primary purposes:

  1. To ensure that skilled construction workers who worked on state and local publicly funded projects would be paid at least the wages and benefits that “prevailed” in their local communities, and
  2. To ensure that predatory contractors would not have an incentive to import unskilled or low-skilled workers from other parts of the country who were willing to work for less than the local market was paying.

The Idea of a “Prevailing Wage”:  A Brief History

The idea of legislating a prevailing wage law began in the late 19th Century as a way to assist workers trying to support themselves and their families. Initially, the rationale was poignant but limited: to lessen the economic exploitation of an ever-growing number of hourly wage workers.   A second reason that later gained broad, public support – and the one most often voice by political reformers – was that forcing workers to work for low wages was contrary to the nation’s goal of raising the standard of living for all Americans.

In that early industrial era, almost all jobs were low paying and worker protections were non-existent.   Even worse, though the courts had ruled otherwise, those who sought change using collective action were still often viewed as part of a ”criminal conspiracy.” For workers, conditions couldn’t be worse.  While the economy as whole continued to expand, most industries (and their workers) suffered from fairly regular and sometimes extreme business fluctuations – making work relationships tenuous at best and making job security an all but impossible goal to achieve.

In such an economic environment, employers were free to “bargain” with workers – primarily to see which one would work for the lowest wage.   With exploitation so pervasive, workers could find themselves working up to twelve or more hours per day and seven days a week for less than subsistence.  For workers with families, their economic plight often made it necessary to have more than one income – forcing both parents to work many hours each day for meager pay and often forcing children to work instead of going to school.

However, even before the end of the last century, many Americans began to question why such conditions were afflicting an ever-greater number of workers.   More to the point, a growing number came to believe that, having an economic system that favored businesses which paid the least possible wages was clearly incompatible with our country’s founding principles of freedom, equality, justice, and the “pursuit of happiness.”   In fact, many reformers went further, charging that it was blatantly hypocritical for America to espouse the benefits of a “free enterprise system” while the reality was increasing impoverishment.

In 1891 Kansas became the first state to attempt to alleviate these problems by passing, the Eight-Hour Bill, which included the idea of a prevailing wage. It is of interest to note that, around the turn of the century, wages were generally paid on a per diem basis.  The Kansas Eight-Hour Bill required that the minimum per diem wage that prevailed before passage of the law would remain at that rate for an eight hour work day on all public works projects.  Over the next three decades many states adopted legislation similar to the Kansas bill and by the end of the 1920s forty-one states had passed some sort of prevailing wage provision.

In 1931, the federal government enacted its version of the state's prevailing wage law when it passed the Davis-Bacon Act.  The Act's original intent was (and remains today) almost identical to that of the Michigan Act.  First, to ensure that skilled construction workers working on publicly funded projects would be paid the wage that "prevailed" in their local communities.  Second, to ensure that predatory contractors would not have an incentive to import workers willing to work for less and thereby be able to undercut local businesses and contractors.

During the “Roaring ‘20s” the construction industry generally and workers in particular, became increasingly demoralized as underbidding and cutthroat competition became pervasive. For example, in 1927 New York contractors eagerly sought the many federal contracts being awarded to build a Veteran's Hospital. However, because the New York contractors submitted bids based on wages prevalent in the local labor market, they found themselves under-bid by an Alabama “construction company.”   

Once the contracts had been awarded, the Alabama company imported all its workers from its home state where wage levels were substantially lower than those paid in New York.   Coming to the defense of his local businessmen, Representative Robert Bacon submitted a bill to Congress that required any contractor awarded a federal contract to pay its workers at least the “prevailing wage” in the local area.  Though Bacon’s bill was initially defeated, his proposed legislation would eventually become the basis for the Davis-Bacon Act.  Representative Bacon justified his proposal as follows:

The Veteran's Hospital was awarded to a firm from Alabama who had brought some one thousand workers into my district.  They were herded onto this job, they were housed in shacks, they were paid a very low wage, and the work proceeded. It seemed to me that the federal government should not engage in work in any state and undermine the labor conditions and wages paid in that state.  The least the government should do is comply with the local standards in the locality where the construction is to take place.