Last week I talked about how unions effect the auto industry and how that influence effects all consumers. The auto industry is not the only place unions have exerted influence over wages. Many years ago, unions lobbied for the passage of prevailing wage laws in many states. Union firms were losing jobs to smaller minority companies who underbid the larger, union companies. The union companies could have lowered their costs but instead lobbied for the passage of prevailing wage laws. Ohio first enacted a prevailing wage law in 1931. These laws effect how public entities must choose who will complete construction projects paid for by the entity and how workers on that project will be paid.
A public entity is any state, city or local government, including state colleges and universities. If one of these entities undertakes any type of construction project, which exceeds a minimum monetary threshold, it must follow certain procedures for contracting that work. There are certain exemptions, such as public schools (K-12) and hospitals. First, the public entity must publicly advertise that they are accepting bids for the project. There is a specific date by which all bids must be received and then the sealed bids are opened and read publicly. The job is then normally awarded to the lowest or best bid. Because smaller, non-union companies are able to under bid union companies most of the time, non-union companies would be at an advantage in this bid process. Therefore, unions want prevailing wage laws which require all companies who are awarded jobs by public entities to pay at prevailing wage. Prevailing wages are based on the union pay rates in that area. The end result is that non-union companies must pay their workers the same, higher rates of pay as the unions.
Sounds great, right? Well that is what proponents of the prevailing wage laws would say. Their argument is that governments are the largest purchasers of construction work and if there is not a minimum wage required for these jobs the average wages of workers in that local market would be artificially lowered. Some would say this is just protection for workers and anything that pays workers better must be good. Also, supporters say that these laws result in better quality work. This is an interesting conclusion since the majority of private construction contracts are awarded to non-union companies. If their work was not as good as union companies it is unlikely this would be the case. Supporters also say that prevailing wage laws lead to long term cost savings. Considering that these laws actually force higher wages it is logical to conclude that it actually leads to higher construction costs. Once again the unions have exerted their influence to force a system which interferes with a free market and causes inflated costs. All of this is paid for by you, the taxpayers.