Mike Nichols testimony on prevailing wage law

Testimony of WPRI President Mike Nichols
for Assembly Bill 32, Wisconsin State Assembly Committee on Labor
May 27, 2015

Representative Jacque, Members of the Committee,

Thank you for the opportunity to speak this morning. I am Mike Nichols, president of the Wisconsin Policy Research Institute. Many of you are familiar with WPRI. For almost 30 years, we have provided nonpartisan, objective research on issues of interest and importance to Wisconsin’s citizens and policy-makers.

WPRI typically spends a lot of time and energy chronicling the history and aggregate economic impact on taxpayers of government laws and regulations. Today, we leave that to others you will no doubt hear from.

Rather than asking an economist to examine the impact of the prevailing wage law from the 30,000-foot level, we asked five veteran Wisconsin journalists to take an up-close look at how the law impacts state businesses, taxpayers and government employees every day. And what we heard is that the law is a burden for taxpayers, an impediment to fair competition and often a bureaucratic morass for contractors who deserve better.

Please don’t take my word for any of this. Our report – “Real-World Impacts of Prevailing Wage” – contains the names, stories and concerns of Wisconsinites living all across our state and in many of your districts.

A Common Council president in Hartford told us that in his city changing the prevailing wage law “has an urgency that it may not have for others” because they are about to replace their pool with a new aquatics center. The prevailing wage law, if left as is, will cost them an estimated $400,000 – enough to replace all the vehicles in their Police Department.

We talked to a school superintendent in the Elmbrook District who says without prevailing wage requirements they could save about $300,000 on HVAC work at an elementary school this summer – money that could be used for teaching instead.

We talked to a School Board member in Brillion who says they’ve been paying 10% to 15% more than they should on projects for decades.

But this isn’t just about money.

Many good companies, the same School Board member told us, won’t even bid a prevailing wage project because of all the paperwork. Or because they don’t want to deal with the internal strife of paying decent, regular wages to some of their workers and government wages to others. One contractor in Manitowoc told us that he didn’t like what the law did to his workplace. It created tension among his workers, 90% of whom worked on jobs in the private sector and 10% of whom would get another $10 or $12 an hour to work on government jobs.

Many contractors, for all those reasons, give up competing. It’s not a truly competitive process.

Nor is it an easily decipherable one.  Because the methodology used to determine prevailing wages is flawed, rates for, say, a painter in Fond du Lac County can nearly double in just a year. That makes it hard to bid a job.

Other contractors bid, but say they have a hard time figuring out which rates of pay the government wants them to use. Government workers, meanwhile, sometimes have a hard time figuring out if a job must adhere to prevailing wage requirements at all because prevailing wage laws apply to a lot more than just new ground-up building projects or roads.

Grafton officials told us about how they found out maintenance projects can be governed by it as well. Some contractors in Fort Atkinson fear that it even applies to projects in which they want to donate their services.

Finally, the law isn’t even applied evenly. We found that Dunn County officials rightly concerned that prevailing wage laws were adding up to $1 million to a nursing home project were able to get lawmakers in 2011 to simply exclude them from the requirements of the law.

No one can blame them for asking. But it’s hard to understand why they should have to. Think about it. The prevailing wage law requires responsible, concerned, local elected officials to get permission from the state to spend less of their own money.

This isn’t just poor policy. It’s nonsensical.

In sum, we have a law that pulls money out of the pockets of taxpayers who don’t have a lot of it to begin with; that requires contractors to spend countless hours filling out forms, trying to communicate with bureaucrats, lodging appeals and scratching their heads when they’d rather be working on a job; that creates internal strife in private businesses and ultimately impedes competition because they don’t want to deal with the government.

It’s not fair, at the same time, to pretend “government” is some sort of monolithic sinkhole full of bureaucrats who just don’t care. We found smart elected officials and administrators who have a hard time planning projects because of ever-vacillating prevailing wage rates, who want to provide better schools for kids but struggle to explain the exorbitant costs to taxpayers, who have a hard time even determining which projects are subject to prevailing wage requirements and which ones are not.

Some say the law somehow can be “fixed” rather than repealed. The problems are so fundamental that it is hard to see how. In fairness to taxpayers concerned about their wallets, contractors concerned about their businesses, government servants who want to better serve their neighbors, please consider doing away with these antiquated, costly statutes.

Without them, Wisconsin can once again prosper.

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