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.

(Continued)

The less-powerful interest group may be well-positioned to work with the general public to change the law, but it will be difficult given public apathy and ignorance. (Import restrictions on steel are another example, benefiting the domestic steel industry while harming firms that use steel as a prominent input.)

What difference would it make to repeal “prevailing” wages? We can confidently say that the prevailing wage increases the cost of public-sector construction projects, resulting in some combination of higher taxes and lower quality and quantity.

Would repealing prevailing wage laws make a difference? Yes, as economists often say, “at the margin.” The recent passage of a right-to-work law in Indiana provides a useful comparison. Prevailing wage is probably a relatively small factor at the macro level. Still, why is it ethical or practical to impose these costs on others?

With a predominantly Republican government in Indiana, prevailing wage may be the next interest-group privilege to fall.

Eric Schansberg, an adjunct scholar of the Indiana Policy Review Foundation, is professor of economics at Indiana University Southeast. Contact him at dschansb@ius.edu.

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