Kokomo Tribune; Kokomo, Indiana

Opinion

July 26, 2013

ERIC SCHANSBERG: Prevailing wage in construction next target for Statehouse?

Minimum-pay law hikes public construction costs.

A pre-vailing wage is a legal arrangement to set minimum compen-sation (wages and benefits) in public-sector construction at rates above where market participants (demand and supply) would otherwise reach equilibrium.

As always, the basic choice is between markets and government; we either allow people to do what they want, or not. And as always, there are both ethical and practical considerations. Ethically, one should ask how this could be a role for government. Practically, how will the law work in practice?

Prevailing wages (or “common wages”) are state and local versions of the 1931 federal Davis-Bacon Act. They exist in 32 states, including Indiana and all surrounding states. They are imposed on a minimum project size of $350,000 in Indiana. (The Davis-Bacon threshold is only $2,000.) Typically, prevailing wages are set at or near the “prevailing” union compensation.

By definition, prevailing wages are a minimum wage applied to one segment of the labor market. It benefits those who keep their jobs, but imposes a burden on owners (who will lose money or avoid the regulated market) and taxpayers. Although it is difficult to calculate the cost increases — particularly when trying to aggregate those estimates — it is clear that the artificially high wages will increase costs significantly.

Public Choice economists have observed that motivated and powerful interest groups are regularly able to get politicians to impose subtle costs on the general public in order to pocket concentrated benefits. For example, we could take $1 from 300 million people and redistribute $30,000 to 10,000 people.

The former group would be mildly irritated if they notice at all. The latter group will invest considerable energy in political markets to see the legislation pass. In a democracy, small interest groups often carry the day against the far-larger but far-less-energetic general public.

With prevailing wages, the model is more complicated since union workers benefit disproportionately and often at the expense of non-union workers. So, we have a powerful interest group working against a less-powerful interest group and the general public.

Text Only | Photo Reprints
Opinion
  • Road must be made safer Eight months ago, the Indiana Department of Transportation opened the new U.S. 31 bypass east of Kokomo. Joining Mayor Greg Goodnight was Gov. Mike Pence. Even the Kokomo High School marching band performed at the ribbon-cutting ceremony. It was the

    July 24, 2014

  • SEN. JIM BUCK: New laws offer help for kids Families with children who have special needs often face difficulties finding the best care or treatment for their specific circumstance. During the 2014 legislative session, the Indiana General Assembly passed several initiatives to assist these fam

    July 24, 2014

  • LETTERS: Christians must stand with Israel 'As Christians we must stand with life' The present conflict in Israel is with Hamas, recognized even in Egypt as a terrorist organization. Recently Hamas formed a unity government with the Palestinian Authority in Gaza. They're now the government in

    July 24, 2014

  • BILL STANCZYKIEWICZ: Youth sports leagues are on troubling decline An important youth development activity is looking to end a recent losing streak. Participation in organized youth sports leagues for baseball, football, basketball and soccer declined by 4 percent between 2008-2012, according to a report in the Wall

    July 24, 2014

  • Keep eye out for kids

    With most local schools welcoming students in a couple of weeks — and Kokomo schools beginning class Aug. 5 (yes, a week from this coming Tuesday) — it’s important for motorists to think about safe driving as children travel to and from school.Law en

    July 23, 2014

  • MAUREEN HAYDEN: Expiring term heightens urgency of legislator's mission State Rep. Rebecca Kubacki had plans for her return to the General Assembly next January.The two-term Republican from Kosciusko County wanted to exert “full force” to roll back a law that prevents the children of undocumented immigrants from paying i

    July 23, 2014

  • LETTERS: Let's hope 7th Circuit sides with couples Let’s hope 7th Circuit sides with couplesIf you blinked over the past month, you probably missed some news about marriage equality in Indiana.First, a federal court ruled that the state’s ban on marriage for same-sex couples was unconstitutional, whi

    July 23, 2014

  • CECIL BOHANON: Spend down surplus? Been there, done that Back in 1998, the state of Indiana had more than $1.3 billion in surplus funds in its general account. This was about 57 days of state spending. The state had total surplus funds of more than $2 billion that was over 24 percent of its annual operatin

    July 23, 2014

  • Rob Burgess House of Burgess: Bush? Clinton? Next, please

    Here comes a sentence I don’t usually find myself typing: I agree with Barbara Bush on something. Jan. 20, C-SPAN aired her installment in the series “First Ladies: Influence and Image,” which was filmed at Bush’s Houston home. “Do you think there is room for another Bush in The White House?” asked host Peter Slen. “This is a great American country, a great country, and if we can’t find more than two or three families to run for high office, that’s silly, because there are great governors and great eligible people to run,” said Bush. “I think Kennedys, Clintons, Bushes; there are just more families than that.”

    July 23, 2014 1 Photo

  • State aims at outbreaks More than 200 Western School Corp. students were vaccinated for chickenpox after an outbreak in March 2012.The virus was confirmed to have infected five fifth-graders, the Howard County Health Department reported. It acted quickly to prevent the infe

    July 22, 2014

Featured Ads
Only on our website
AP Video
Raw: Gunmen Attack Iraqi Prison Convoy Plane Leaves Ukraine With More Crash Victims The Rock Brings Star Power to Premiere Raw: Families Travel to Taiwan Plane Crash Site Arizona Execution Takes Almost Two Hours Gen. Odierno Discusses Ukraine, NATO at Forum Gaza Fighting Rages Amid Cease-Fire Efforts Mint Gives JFK Coin a Face-lift Creative Makeovers for Ugly Cellphone Towers Ariz. Inmate Dies 2 Hours After Execution Began Crash Kills Teen Pilot Seeking World Record LeBron James Sends Apology Treat to Neighbors Raw: Funeral for Man Who Died in NYPD Custody Migrants Back in Honduras After US Deports Israeli American Reservist Torn Over Return
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Obituaries
Poll