The Building Tradesman Newspaper

Friday, April 03, 2015

'An absolute disaster' Prevailing wage repeal would hurt industry, exec says

By Marty Mulcahy, Editor

LANSING - Michigan's Prevailing Wage Act of 1965 - which is at dire risk of being repealed as early as May by an ultra-conservative state Legislature - has its proponents among major construction contractors and Republican lawmakers. And two of them spoke of their support for the law at the 56th Legislative Conference of the Michigan Building and Construction Trades Council.

"For many years our current prevailing wage laws have provided a model that appropriately balances costs, productivity, quality, safety in a highly competitive market like the public sector," said Michael Stobak, central regional vice president for the state's largest contractor, Barton Malow Co. "It is always worthwhile to explore more cost effective ways to get the job done, but let's avoid the temptation to take the easy route and return to what we know is a failed approach."

The council's March 11 Prevailing Wage Symposium was attended by numerous state legislators and staffers. It was hosted and moderated by another major proponent of prevailing wage, Mike Crawford, executive director of the National Electrical Contractors Association, Michigan Chapter. Also on hand was state Sen. Mike Kowall, (R-White Lake) one of the few GOP lawmakers in the state who supports prevailing wage. Crawford provided some history of the state's prevailing wage law, noting that it was based on the federal Davis-Bacon Act of 1931, named for its two Republican sponsors.

"Over the past six months there has been a lot of rhetoric regarding the value of repealing prevailing wage," Crawford said. "Way too many people have been spoon-fed information about what prevailing wage is or isn't. So let's spend a little time talking about what prevailing wage is."

With that, Stobak explained his take on prevailing wage, and he offers a unique perspective. He said his experience in construction and as a school board member prompted him to insist, successfully, that prevailing wage rules be used by his local school district when it comes time to bid out projects. And Stoback said he has been around long enough to remember what happened beginning in November 1994, when Michigan's prevailing wage law was invalidated for 30 months by a successful legal challenge. An appeals court reinstated the law in July 1997.

"I lived through the 1990s, when prevailing wage was suspended," Stobak said. "And let me tell you, I don't ever want to go back to that again. It was an absolute disaster. We noticed immediate changes in the marketplace, and it was not positive. And I'm not talking about some minor changes or some market shifts. We witnessed drastic reductions in experience levels of trades that could adequately man projects, obtain the right productivity to meet schedules and do it in a safe and effective manner. Bidding public work became all about how cheap can I do the work, it became all about price. As a result, we witnessed an exodus of qualified contractors that for many, many years, had participated in the public arena."

Rarely have contractors in Michigan been outspoken about prevailing wage, unless the Associated Builders and Contractors trot out one of their contractors to speak against it in an op-ed or at a public hearing. The ABC and conservative think-tanks like the Mackinac Center for Public Policy claim that prevailing wage repeal will save up to 20 percent of public construction costs, while numerous other academic studies have found there are zero savings with prevailing wage repeal, while workers wages are lowered.

Barton Malow, Stobak acknowledged, hires both union and nonunion contractors. "I don't have any particular allegiance to anyone, but I am here to talk about how prevailing wage affects the work that I'm involved with on a daily basis," he said. Stobak said he went to bat for the law among his fellow school board trustees even though "it becomes very tough in the public arena to argue that we need prevailing wage because it's better, when someone is arguing that you can save money." He added: "That's how much I believe in it, that as a board member, a taxpayer in my own community, I want it. Because I knew it would deliver quality projects to our school district."

Stobak did some additional "debunking" about prevailing wage law, including the myth that state and local governments will save money if it goes away.

*Numerous researchers have said that absent prevailing wage, contractors don't lower bids, they keep them the same and pocket the profits. "Ultimately we will never realize the benefits of lowering public construction costs," he said. "Because they (construction costs) will rise to the level that they're going to rise, just like they did in the 90s."

*"Prevailing wage is not a union-nonunion issue. It is a construction quality, productivity and safety issue," Stobak said, adding: "Those that say prevailing wage jobs go to union contractors - I've had the privilege of meeting many of you out in the audience and your counterparts because a lot of work doesn't go union, and you want to talk to me about that. So let me tell you, a lot of the work doesn't go union, but it goes out in a fair, competitive manner."

*Prevailing wage repeal harms the contracting market. Highlighting what happened in Michigan when prevailing wage was repealed in the 1990s, Stobak said, "although we did experience some very short-term cost savings, we realized this change very quickly. Because as we lost a large portion of the contractors that participate in the public market, the supply of contractors went down and prices quickly rose and escalated nearly or at where they were at, prior to prevailing wage being eliminated."

*Repeal hurts the workforce, too. "Quantity, productivity and attention to safety remained at an all-time low for us," Stobak said. "Because in order to remain competitive, contractors no longer invested in employee training and safety. It was, again, all about being cheap. The results were more change orders, increased safety infractions, workplace injuries, and increased litigation. And those are things that don't show up in a lot of these studies and on the bottom lines of these reports.

"These were actual things that we experienced as part of these projects. And it became extremely difficult to manage public work."

State Sen. Kowall, who worked in a family carpentry business for three decades, told the symposium that it's the greater "safety aspect" that leads him to support prevailing wage.  He said the presence of construction union training means the government doesn't have to "reinvent the wheel" and pay hundreds of millions of dollars more for public sector worker training.

"The prevailing wage factor enables us to go in and educate young people going into the trades and teach them the right way to do it," he said. "Last week I was at the Iron Workers (Local 25) Training Center in Wixom, and you could see by what they're teaching the young folks is that there is a right way and a wrong way to erect steel, to go ahead and create a jobsite that's safety-minded so that people can go home at the end of the day."