Your business is growing and it’s time to build that new warehouse. You’ve done all of your homework: shopped around for the best rate, talked to several contractors and bid the project. Everything is ready to go and you are being prudent with the funds you have to invest as you look toward the future. That’s what businesses do.
Now, add an additional 30 percent for the cost of labor to the bottom line.
If you are a local government in Kentucky building a project over $250,000, that’s exactly what you have to do because of a law called prevailing wage.
Prevailing wage exists to make sure that construction workers on a public construction project are paid according to a higher scale, set by bureaucrats, rather than the going rate for any other project.
Studies show this can add as much as 30 percent to the cost of labor on the project, meaning taxpayers foot the bill and get less for more.
The theory is that the wages set by the free market are too low, so taxpayers should pay more as some sort of social-welfare program.
Furthermore, former Kentucky Labor Secretary Larry Roberts penned a recent commentary arguing that workers paid the prevailing wage are more efficient and experienced than workers paid market rates.
But prevailing wage does not guarantee that workers are more skilled or efficient — it only guarantees that they are paid more to perform the same job. The extra 30 percent is of no benefit to the taxpayer or the city.
In a recent commentary, Jason Bailey of the Kentucky Center for Economic Policy relies on a study from Colorado and argues that eliminating prevailing wage would lower construction worker income by 10 percent and put nearly 6,000 workers on public assistance and food stamps.
I don’t know about you, but the last time I paid a plumber, his hourly rate was far and away above the poverty line. Don’t get me wrong, I know working in construction is a tough job. I appreciate the knowledge and skills to do the job well. But the markets should set the pay. That’s the American way.
Also missing from Bailey’s argument is the fact that by reducing the cost of a public project more projects may become reality. This would create more jobs and more opportunities.
And what about the people who work hard to pay their taxes? Should they be subjected to costs of 30 percent more as a form of public assistance to subsidize someone else’s family?
Where does this stop? Should governments pay more for gasoline? For copier paper?
Let’s let government act more like business and use the free market to help create growth and build the middle class. Repealing prevailing wage helps cities, citizens and the economy.
Artificial programs that stymie growth only hurt Kentucky and its citizens.
Jonathan Steiner is executive director/CEO of the Kentucky League of Cities.
At issue: Commentaries by Jason Bailey of Kentucky Center for Economic Policy, “Cutting wages no way to grow Kentucky’s economy” and by former Kentucky Labor Secretary Larry L. Roberts, “Productivity slides without prevailing wage laws”