As Americans we value freedom and embrace competition. We recognize that the benefits of competition, lower prices and improved quality, drive our free markets and have propelled our economy to be one of the strongest in the world. We also understand that when governments artificially interfere in this dynamic, the results are nothing short of detrimental.
Thirty states have prevailing wage laws that directly interfere with competitive pricing. Ohio has had a Prevailing Wage Law in place since 1931, which requires local governments to pay construction workers a state mandated wage. This prevailing wage is inflated because it is calculated including: the base hourly wage plus "fringe" benefits such as health, welfare, pension, apprenticeship, training, vacation, annuity etc. In addition to being expensive, a state mandated prevailing wage is also bureaucratic.
Before going out to bid or undertaking construction, the local government must have the Ohio Department of Commerce (Division of Industrial Compliance, Bureau of Wage and Hour Administration) determine the prevailing wage rates and this rate must be included in the project specifications. If you think that sounds bureaucratic; you are right. It is so bureaucratic that some companies simply stop bidding on prevailing wage jobs, further diminishing competition.
Prevailing wage is nothing more than a government mandate that forces taxpayers to overspend on construction projects.
Because local communities are shackled with Ohio's prevailing wage law, each project is likely more expensive that it otherwise should be. This makes projects not only more expensive for taxpayers but also translates into less construction in many communities and fewer jobs. The ideal solution would be to eliminate this "state mandated" wage altogether and allow market forces to drive competitive pricing. There have been several attempts to accomplish a complete repeal, unfortunately we have so far only been successful in marginally raising the threshold for which prevailing wage applies, from $200,000 to $250,000 for new construction.
However, in Ohio we have a new proposal on the table: Representative Riedel and I are jointly sponsoring HB163, a companion bill to SB72 (Huffman), which would make using prevailing wage optional for local governing authorities. It is complete local control. Each community can decide for themselves if they would like to use a higher, state calculated, prevailing wage, or be fiscally responsible and allow for competitive, market pricing.
Based on past experience, the potential savings for using market pricing instead of a state mandated prevailing wage could be staggering. In 1997 Ohio specifically exempted school construction from prevailing wage law. Five years later, in 2002, the non-partisan Legislative Service Commission, issued a report stating that the aggregated savings in Ohio for school construction resulting from the elimination of the prevailing wage requirement was $487.9 million.
Those elected to public office should always strive to be good stewards of our resources and aim to get the most for each tax dollar. For those communities who wish to stretch their dollars further, this flexibility will prove essential.
If you have any questions or would like to provide input into HB163, I would love to hear from you. Please do not hesitate to contact my office at 614-466-1177 or by emailing at Rep37@ohiohouse.gov.
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