Former Wisconsinite George Leef has written an excellent article for the Cato Institute that discusses “prevailing wage” laws for public projects. (Wisconsin is a prevailing wage state.) Prevailing wage laws essentially set the wages workers may earn on public projects, usually ones in which the labor not subject to a public bidding process.
In the article, Leef argues that rather than promoting the public interest, prevailing wage laws serve only to further the interests of labor. He concludes:
The purpose and effect of prevailing wage laws is to eliminate competition on labor costs on government construction projects.
Bidders may search for the least-cost combination of other factors, but labor costs are fixed by decree. This suppression of competition is a substantial benefit to a small segment of the population, chiefly construction unions and workers, at the expense of the rest of society, which must pay more than would otherwise be necessary for projects subject to prevailing wage mandates.
Efforts by prevailing wage proponents to depict the laws as having some social benefit fail. Fixing the price of labor does nothing to increase safety, train new workers, promote quality or any other desirable objective. Nor is there any social benefit in “protecting” union wage standards and work rules from competitive pressure.
Prevailing wage laws are special interest legislation trying to masquerade as wise public policy. People prefer to minimize or eliminate competition in markets where they sell, while enjoying the benefits of competition in markets where they buy. Prevailing wage laws are one of the various approaches organized labor uses to shut down competition in labor markets. Adam Smith was correct: It is bad public policy for government to assist any group of sellers in their desire to fix prices and stifle competition. That is why all prevailing wage laws should be repealed.
Read the whole thing here.
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