STATE HOUSE -- In hearings before the House Labor Committee Tuesday, State Representative Patricia Morgan (R-Coventry, West Warwick,Warwick) said changes to the state’s ‘prevailing wage’ statute could save the state and its municipalities millions annually in construction and maintenance expense.
Legislation filed by Morgan, House bill 5339, would increase to $50,000 the minimum bid amount requiring application of the state’s prevailing wage law.
Under the law, which has been in effect in different forms since 1931, every state or municipal contract of $1,000 or more must be bid according to wage levels determined by the state’s Department of Labor & Training. The effect of this is that the state and not market competition establish the minimum wages to be paid to various types of employees in various parts of the state.
“As a result of our prevailing wage laws, it seems clear that state agencies, municipalities and school districts are paying far more than necessary in construction and maintenance costs, all of which translate into higher government expense and ultimately, higher taxes," Morgan said.
“These higher expenses for community infrastructure, projects that cannot be postponed, present an onerous obstacle to our communities’ financial health. And that financial health cannot be improved when cities and towns cannot control their costs. This measure would provide some needed relief, however small.”
“These statues do everything we don’t want to happen in an already-threatened state economy. They prevent competitive bidding on the labor costs of public construction. They distort the entire labor market. They create additional compliance costs for employers. And they require an entire separate bureaucracy to set wages, enforce the law and deal with related disputes," Morgan continued.
“In an ideal world, we would eliminate prevailing wages as a way of doing business entirely. These laws harken back to the depression, and were enacted under entirely different circumstances than today. Nine states have never embraced them, and another nine wisely have repealed them. We are one of a remaining 32 states clinging to the idea that state management of wage levels is a good idea, and there is no evidence that it is,” she said.
In her testimony before the committee, Morgan pointed to several examples of where elimination of prevailing wages resulted in significantly changing costs:
- Michigan suspended its prevailing wage law for 30 months as a result of a court order later overturned. During the suspension period, however, one winning bid for school renovation came in 16 percent less than forecast. Overall, Michigan has estimated that some $275 million was saved in construction outlays during the period.
- Ohio exempted school construction and renovation from its prevailing wage statutes in 1997. A study by its state legislature in 2002 showed Ohio schools saved $487.9 million, or 10.7 percent, in construction costs over the five-year period as a result. Surveys of school district officials indicated no change in work quality during the period.
- California in 2001 extended coverage of prevailing wage to include construction of state-subsidized housing. Costs on new projects rose virtually immediately by nine percent, and ranged as much as 37 percent higher that previous construction costs. The change led to a decrease in construction of low-income housing by 3,100 units the following year. Costs of new state-subsidized housing units increased an average 25 percent, forcing rents to a level $400 more than previously charged.
“I harbor no illusions that this modest change will have huge impacts on state and municipal construction budgets, or ultimately, taxes," Morgan said. "A preferred change would be to repeal prevailing wage statutes entirely. But this will hopefully serve to get the conversation going, and force serious discussion about ways to cut state and local spending in this arena."
The bill is co-sponsored by state representatives Chippendale (R-Foster, Glocester, Coventry); Trillo (R-Warwick); Giarrusso (R-East Greenwich, West Greenwich); and Costa (R-North Kingstown, Exeter).