Eden Prairie, Minn. (March 15, 2011) – Minnesota Chapter of Associated Builders and Contractors (MN ABC) strongly supports Minnesota HF 722/SF454 to reform the biggest government inefficiency in state government today-the antiquated and archaic Prevailing Wage Law.
The law was written 38 years ago with the goal of preventing local wages from being undercut by out-of-state contractors using cheap labor. However, it has turned into a law that negatively impacts contractor access to work opportunities.
The Prevailing Wage Law not only artificially inflates construction rates by as much as 10 percent according to the MN Taxpayers Association; it prevents many qualified small and minority-owned businesses from bidding on public work, because the complexities and inefficiencies make it nearly impossible for small businesses to compete.
Robert Heise, MN ABC President said, “One word makes the law a travesty for taxpayers-the word is ‘mode’. Look at any elementary school math book and it will indicate the mode is the poorest statistical calculation and should be avoided.”
Here’s how it works: Minnesota requires that construction wages be calculated on the actual wages paid to the largest number of workers. The most frequently occurring wage is called the mode.
This calculation increases wages more than 10 percent on roads, bridges, schools and any project where state money is used. Amazingly, Minnesota is an island in this calculation with 48 states and the federal government using the “average wage” to establish labor costs, which brings more value to taxpayer’s dollars and makes more money available for new schools, additional classrooms and other needed public facilities and infrastructure.
Here’s a prime example of how artificially inflated public financed projects can become with prevailing wages. Our state has spent about $1.7 billion on schools, building projects, and transportation projects every two years for the last decade or about or $8.5 billion.
Simply multiply $8.5 billion by 10% of inflated prevailing wage costs and you get an extra $850 million of taxpayer money being wasted just in the last decade!
Minnesota’s outdated Prevailing Wage Law inflates state construction costs by millions every year. Taxpayer’s can no longer afford this unfair law. We cannot allow politics to get in the way of good policy and sound economic decision-making. It’s time for our legislators to act!
MN ABC is a state association representing more than 375 merit shop construction related firms employing over 23,000 people across the state. www.mnabc.com