Study: Michigan’s Prevailing Wage Law Could Drive Up Road Construction Costs by 14.3 Percent

by Bruce Walker

States without prevailing wage laws pay far less for road construction and repairs than states with them, according to a study written by Dr. Michael Hicks, a professor of economics at Ball State University.

Hicks concludes prevailing wage laws increase costs by 8.5% to 14.3% per mile of quality-road construction. Using 2018 costs in Michigan – the year the Great Lakes State repealed its prevailing wage law – those percentages translate as $5,900 to $9,200 per mile of road.

Prevailing wage laws require firms to pay employees working on public construction projects wages based on the prevailing wage in the area, which is established by union wage scales. Opponents argue prevailing wage laws make it more difficult for nonunion companies to compete for such taxpayer-funded public projects as road construction and building schools.

“Michigan lawmakers passed the state’s Prevailing Wage Act in 1965,” Hicks said in his study’s executive summary. “The law mandated that workers hired on taxpayer-funded construction projects be paid the wages and fringe benefits which were prevailing in the locality where the project was to be built. This prevailing wage was tantamount to union-scale compensation because the law required wage rates to be based on the union contracts covering construction workers operating in the city, township or school district where the work was to be done.”

Hicks used national data collected from the Federal Highway Administration, the Bureau of Economic Analysis, and the Bureau of Transportation Statistics. He notes five states as well as Michigan have repealed prevailing wage laws since 2015, including Indiana, Wisconsin, Arkansas, Ohio, and West Virginia. He noted the additional charges wrought by prevailing wage laws in each state as ranging from:

Arkansas (repealed in 2017): $3,122 to $4,845 more per mile.
Indiana (repealed in 2015): $4,424 to $6,866 more per mile.
Kentucky (repealed in 2017): $4,625 to $7,177 more per mile.
West Virginia (repealed in 2016): $5,967 to $9,260 more per mile.
Wisconsin (repealed in 2017): $10,106 to $15,682 more per mile.

However, the Michigan Legislature reinstated the state’s prevailing wage law in March 2023, when Gov. Gretchen Whitmer also signed a bill to repeal the state’s right-to-work law.

“Michigan taxpayers should fully expect future road construction costs to leap with passage of their state’s new prevailing wage law,” Hicks said in a statement. “Research has found that this policy inflicts significant costs on taxpayers, costs that might be better spent elsewhere, including on more roads and better bridges.”

Hicks’ “The Costs of Prevailing Wage: Evidence From State Spending on Road Construction” was published Monday by The Mackinac Center for Public Policy.

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Bruce Walker is a regional editor at The Center Square. He previously worked as editor at the Mackinac Center for Public Policy’s MichiganScience magazine and The Heartland Institute’s InfoTech & Telecom News.

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