A call for repeal of Missouri’s prevailing wage law

Why is repeal called for? Prevailing wage laws increase costs borne by the state, municipalities, and school districts and transferred to tax-payers by:

  • artificial, high minimum wages
  • burdensome and expensive regulations
  • limiting competition

This is not complicated. It is basic supply and demand economics.

The most basic axiom of economics is known to us all:  IF YOU REDUCE THE SUPPLY – PRICES WILL RISE.  It’s that simple. Prevailing wage laws reduce the supply of competitive bids, significantly increase the total costs of projects, and indirectly increase the burden on taxpayers. Add in required record keeping (so the state can compute the “true” prevailing wage for each craft in each locality) and the net result is fewer bids from non-union companies and substantial unnecessary costs to projects subject to prevailing wage. All this is well documented in the academic community as are the fraudulent claims of harm if prevailing wage legislation is repealed.

_____________________________________

Please note that Wednesday there will be a hearing in Jefferson City by the Senate Interim Committee on Labor Reform, Senator Dave Schatz, Chairman. It will take place in the Senate Lounge at 1 pm. You can testify whether you will be present or not. Simply fill out this form:

http://www.senate.mo.gov/17web/wp-content/uploads/2015/10/WitnessAppearanceForm.pdf.

Scan and email it to Senator Schatz, at dave.schatz@senate.mo.gov

________________________________________

Before getting into economic analysis below, I think it might be worth mentioning how unfair prevailing wage laws are. At least minimum wage laws, however harmful, apply to all workers. Prevailing wage laws apply only to construction workers. Both laws create unemployment, but prevailing wage laws tax all to benefit only a chosen, privileged few. How can this abuse of government power be called fair?

You won’t hear supporters of Missouri’s prevailing wage law mentioning unnecessary red tape or the unjust “transfer of wealth” effects of prevailing wage.  Instead they disguise the real effect of prevailing wage by suggesting that less experienced workers, higher injury rates, lower wages, less health coverage and the effects of “harmful competition” will result if the prevailing wage law is repealed. They will also speak glowingly about higher increased earnings and taxes and the economic benefit that accrues from the “spending cycle” which results, they claim, from the higher prevailing wage rates.

Proponents of prevailing wage will also claim that there is a downward spiraling “multiplier” effect to all wage earners when prevailing wage laws are repealed. This claim is sometimes backed by studies, commissioned by the supporters of prevailing wage, that disregard and ignore the economic value of the savings that accrue from the repeal of prevailing wage.  They ignore the fact that these savings, either in form of reduced taxes to citizens or reduced cost to the state, it will reenter the economic cycle for other uses: e.g., other labor projects, other purchases, other services, etc..

For example: One recent study claimed that repeal of prevailing wage in West Virginia would reduce construction income (wages) by $31 to $47 million and result in a total loss of $51 to $77 million in wages, after application of the “multiplier effect” (spending cycle).  This study also claims the reduction of income and sales tax revenue to West Virginia of $4.5 to $6.8 million. Such studies ignore the effect of the economic benefit (for wages and other expenditures) of alternative utilization of the savings on construction wages as well as the multiplier effect of such alternative uses.   In addition, the income and sales tax revenue that would be derived from these alternative wages and expenditures is ignored.

Intuitively we know that if all labor costs were to be increased by law, prosperity would be harmed, not increased. Aggregate prosperity is improved only by increasing productivity – not by increasing wages.   Increased wages, without an increase in productivity, only transfers wealth and reduces prosperity.  If the opposite were true you would need only to pass a law increasing the minimum hourly rate to $500 per hour and we would all get rich.

Proponents of prevailing wage also claim that all deficiencies or problems of prevailing wage laws can be cured by improving the “paperwork,” the reporting of wages used by the Missouri Department of Labor and Industrial Relations to calculate prevailing wage in each reporting area of the state. Utter nonsense.  First, as any contractor knows, unnecessary labor cost to “pick up a pencil” can increase the cost of construction just as much as an unneeded carpenter picking up a hammer.  It’s the equivalent of government forced “featherbedding”. No one is motivated to add unneeded cost to his overhead and will do so only when forced to by law.

I would like to address two other claims made by prevailing wage proponents in Missouri:

  1. That prevailing wage laws produce “fair and competitive” bidding:  This is a twist on the preposterous claim, often used by proponents of prevailing wage, which maintains that the construction industry is uniquely subject to “harmful competition” that slashes wages and reduces standards. Thus when wages are set by law that such harmful competition is limited. A claim of emotional argument, not objective analysis. Think about it and logic alone will tell you that if the wage portion of a contract is fixed and a low bid is secured, contractors will just as likely look to reduce costs in other areas. Thus grade B materials are used instead of grade A.

It is construction management, performance bonding, monitoring and oversight of construction specifications that ensure that quality and other construction standards are met – not the wage rate.

  1. Lack of prevailing wage laws promotes “unskilled workers”: Proponents of prevailing wage laws maintain that in their absence the training of construction workers is inadequate.  The inference is that the industry depends on unions for an adequate supply of trained workers. There is no evidence that there is more of a market failure in the training of construction workers than in the training of workers for any other occupation group. There are community colleges, private technical institutes and other training resources besides labor unions. In addition there is on-the-job training for less skilled “helpers”, who abound in free market construction contracts. With prevailing wage contracts contractors are motivated to hire union workers rather than less skilled helpers due to the cost disparity between the prevailing pay rate that they are forced to pay and the productive value of helpers.

These and other claims advanced by the supporters of prevailing wage laws are a complete disguise of their real PURPOSE: TO LIMIT COMPETITION BY THE FORCE OF LAW.  This purpose applies to both sellers of labor and sellers of construction contracts. The sellers of labor (unions and other labor organizations) want to limit the competition from others who might offer their labor at a lesser price; and sellers of construction contracts want to limit bidders to only those who pay comparable wages as they do, whether by force of union contacts or the force of prevailing wage laws.

Why is the real purpose (limited competition) disguised behind all these claims? As anyone with the most basic understanding of the way markets function knows: when competition is limited prices rise. It’s basic “supply and demand stuff.”  Added costs due to increased wages are paid by Missouri taxpayers. This results in fewer and lower quality government buildings and infrastructure or other “goods and services” than would otherwise be possible with free-market bids.

Of course proponents of prevailing wage can’t sell a prevailing wage scheme on the singular purpose of raising labor costs so they must attempt to justify the law with false and misleading claims.

 

There are many economic studies by scholars with no dog in the fight that debunk the claims by proponents of Prevailing Wage. You need only rely on your own economic knowledge base to determine that buyers love competition and sellers hate competition.

Reduced competition is what the sellers of prevailing wage are seeking. Don’t buy their flawed arguments that disguise the hidden purpose of Missouri’s prevailing wage law.    

Bruce Hillis

Mexico, MO 65265

573.380.1132 brucehillis@charter.net

August 13 , 2017

 

Advertisements

Ban the Box: another liberal idea backfires

I first posted on the foolishness of Ban the Box legislation several years ago. The idea behind this is that if employers are prohibited from asking about an applicant’s criminal history in a check box on job applications, all manner of good things will result.  A recent scholarly study the Powerline blog reported here has evidence that if  the people hiring cannot determine criminal history from an application, they will instead use race as a proxy. The result is: fewer black applicants are being called back and hired than when there were such evil boxes. Is this really a surprise? Do “good intentions” not all too often guarantee a bad result? Instead of crowning their skulls with halos,  the proponents should have used the gray matter inside, as indicated by this quip in the Powerline article:

Charles Murray commented on Twitter: “Any policy analyst who would not instantly predict this unintended outcome should find a new career track.”

Below is my original post on the Ban the Box issue in Columbia, Missouri.

December 2, 2014 the Columbia City Council unanimously voted to prohibit city and private employers from asking about or investigating applicants’ criminal histories until after a conditional job offer has been made. See a newspaper article here. The box on a job application form asking if the applicant has ever been convicted of a crime is now banned.

This step, the first for any Missouri city, is intended to:

  • Level the playing field for offenders
  • Reduce violent crime
  • Reduce recidivism by having more offenders employed
  • Compensate for the “flaws” in our criminal justice system
  • Reduce the cost of enforcement and increase tax revenue
  • Benefit society as a whole

So what’s not to like?

In our opinion just about everything. This is a horrible example of feel-good government activism and abusive overreach, a precedent for even more far-reaching legislation. Regulating essential aspects of business practice is not a legitimate function of local government. It is not government’s business to level playing fields, particularly those tilted by criminal activity. In our opinion it is not a bad thing for criminals released from prison not to have an easy time finding a job. Bad decisions should have consequences. What will happen if this experiment in social justice should be seen not to work? Will we then see affirmative action quotas? Reduction in violent crime by waving magic wands of unproven legislation is wishful thinking. Crime can be reduced – but never eliminated – by incarceration and hiring more police officers. These are costs of essential government services, not frills to be reduced. As for the ‘flaws’ in our justice system, this is liberal twaddle. For some it is too easy to blame the ‘system’ and not the criminal.  Troglo

Troglo

Will the ‘nuclear option weaken the Senate? Don’t believe it.

The ’nuclear option,’ so named because it is believed to be catastrophic to U.S. Senate tradition and function, would remove the filibuster requirement for Supreme Court nominees. But why should Senate tradition, which in this case is not very old, be worth preserving? One case for retaining the filibuster is here.

The French word flibustier at the origin of our term filibuster appropriately means ‘buccaneer’ and by extension ‘crook.’  Until recently the filibuster rule permitted a senator to delay a floor vote only so long as he was speaking from the rostrum continuously – no bathroom or other breaks permitted. He could, however, be relieved by another Senator. This tactic could in principle gain other Senators time in which to round up votes.

But the current rule does not require speaking to an empty chamber reading from Dr Seuss. Now when the minority simply signals ’filibuster,’ a cloture vote to end debate is not permitted and the bill being debated is shut down. Pace filibuster apologists, this hardly extends debate or encourages deliberate consideration of different points of view. It simply ends debate, giving the minority party veto power, like a buccaneer on the high seas invading another vessel. If the goal is to enable extensive debate and further reasonable compromise, other and better rules can be substituted. However, to think that rules can encourage thoughtful compromise is rather naive.

The Senate is all too often the place when good bills go to die. If they do not die, the requirement of a filibuster-proof supermajority makes them emerge diluted and loaded with pork. Remember the Cornhusker kickback, the Louisiana purchase, and the Florida flim-flam provisions in Obamacare? Since the nuclear option exercised today does not apply to legislative filibusters, we can anticipate with dread what Senate ‘tradition’ will do to tax reform and the repeal and replacement of Obamacare. The Senate’s indulgence for its ‘traditions’ seems to suggest a culture of self-importance. Senatorial egos suggest the same.

Don’t believe the pleas to retain the filibuster for judicial nominees. In fact let’s remove the filibuster for garden-variety legislative bills. If we insist on preserving tradition, – why? – let’s bring back the old-fashioned filibuster as detailed here and enable the solons of the Senate to block cloture votes only while they are speaking from the rostrum.    

Troglo (L. H. Kevil)

The Muslim travel ban and unconstitutional religious discrimination

Words matter. The terminology chosen by the Left and its allies such as Big Media can create and then reinforce the way the public thinks about a particular issue. In the phrase the “Muslim travel ban” only the word “travel” is accurate. The President’s executive order does not deal with Muslims as a group, but only with citizens of several countries who cannot be screened for radical or terrorist ties. Nor is it a ban, which properly means a prohibition with the presumption of indefinite duration. It is simply a temporary pause, not a flat-out ban.

Similarly with “unconstitutional religious discrimination.” The Left has long tried to hoist its progressive policies under the banner of fighting “discrimination.” Having successfully redefined segregation to mean not just legally enforced separation by race, but also the communities formed by personal choices, the Left now does the same with “discrimination,” so that any differences far beyond race are discriminatory, thus illegitimate and subject to governmental discipline. What is illegitimate to the Left then must ipso facto be found to be ‘unconstitutional.’ So now bush-league Federal judges with an absence of a constitutionally presumed ‘judicial temperament’ and respect for the separation of equal powers rush to overturn innocuous executive orders with which they disagree.

It matters not that non-citizens abroad have no constitutional rights or standing. Apart from the vaticinations of courts, that is. Federal legislation specifically grants the President broad latitude to regulate immigration and travel into the U.S. of any class of aliens for any reason. (Naming a class of aliens is of course ‘discriminatory’ to the Left. This would include any sect of Islam that espouses total and permanent jihad on the West.) Even in the absence of this legislation the President’s constitutional duty and ability to do so is clear. Any court cognizant of its duty to interpret the law, not rewrite it, would agree. This is not difficult.

Nor does it matter that the widely reported “unconstitutional religious discrimination” is a figment of the fevered imagination of the men in black who push judicial supremacy. In this case the judiciary asserts supremacy over the executive. In the case of the ‘marriage’ of homosexual people it trumped the legislative power and wrote its own legislation.

The attorney and astute commentator John Hinderaker identified the current blocking of the travel order as a ‘liberal coup.”  I could not agree more. The progressive takeover of the courts must be reversed. The perception of the voters is increasingly ratified that though candidate Trump was deeply flawed, the election of Mrs Clinton and her choice of Supreme Court justices would have inflicted calamitous and permanent damage to American culture and institutions.    

Troglo  (L. H. Kevil)

How do we make international trade fair?

Since the desire for “Fair Trade” is the supporting mantra behind each and every threat by government to use tariffs, quotas, or other trade restrictions, shouldn’t fair trade be defined and defended?

There is fair trade whenever trading partners reach agreement on mutually determined prices, terms, and other conditions, whether such partners are individuals, agents, firms or co-operatives.

If such entities attempt to, but can’t reach a mutually acceptable exchange, it is most often due to one or both participants in the bargain determining that  terms of the proposed trade transaction are unacceptable or unfair. Only the parties to the trade transaction can determine what is fair, for them and them alone.

Can government produce fair trade?

I probably don’t need to answer that question, as you likely intuitively already know the answer. I’m sure you wouldn’t hire a representative from the retail grocer association to have the power to determine the price of your groceries, instead of allowing free market competition among grocers to be the primary price determinant. Why? Because the association represents the interests of its member stores and would make every attempt to enhance the grocers’ profit margin, all to your disadvantage.

You shouldn’t want government to interfere with your international trades for the same reason.

When we ask government to govern trade negotiations by means of tariffs, quotas, and other restrictions, it always pursues someone’s interest. It may pursue the interests of consumers, or producers, or distributors, or retailers. If this pursuit results in a change in price or other terms than would otherwise be negotiated via voluntary exchange, the intervention by government would result in favoring one interest to the transaction and disfavoring the others.

Example: If government implements a tariff to favor US producers, to protect them from what it determines to be “unfair competition,” it disfavors US consumers by making their purchases more expensive, harder to get, etc.

By this reasoning we must conclude that government can only produce UN-FAIR trade.

The only way that government can pursue the interests of all is to refrain from intervening in international trade.

#separationofeconomyandstate    Bruce-thumbnail

Bruce Hillis

Protesters dissatisfied with election results should redirect their protests

 

The recent election has produced much angst as well as a substantial amount of misdirected response.  All seemingly due to what many citizens believe is an unfair federal election process that ignores the total popular vote of all U.S. citizens.

Correctly understood, there are no federal elections. There are only state elections.  State elections choose U.S. senators and congressmen to represent the interests of the people of their state in the U.S. Congress.  These state elections also choose electors to represent that state in the selection of the President and Vice President.

Many citizens may believe that since everyone votes for the President on the same day that it is a national or federal election.  Not so.  Although “the Tuesday next after the first Monday in the month of November” is set by federal law as the date for electing those who will select the President, there are only fifty state elections – not one big federal election for all fifty states.

I can’t imagine that citizens of a state would want citizens of another state  to vote in an election to choose their United States Senator or Representative, so why should anyone want citizens of another state to be able to vote in an election to influence their state’s choice for President?

If citizens believe that their votes and voices are not being heard in their state; or that their state does not adequately represent their interests, they should take their complaint to their respective state Capitol; or simply move to another state more compatible with their interests.

Such is the beauty of federalism and the freedoms secured by our founders.   Bruce-thumbnail

Bruce Hillis