Construction Wage Repeal Would Nix 80-Year Old Law

Feb 24, 2015

Credit Elvert Barnes / https://www.flickr.com/photos/perspective/

The Indiana common construction wage law was signed in 1935 to revive the economy. Eighty years later, the House is set to vote on its repeal due to argument over the law becoming too expensive to maintain.

"Prevailing wage" laws require that building-trades workers on government projects receive the average wage for their specialties. I-U Maurer School of Law Professor Ken Dau-Schmidt says the rationale was to make government a neutral player in setting wage rates, rather than pushing wages down through its immense purchasing power. 

But Dau-Schmidt says reducing construction costs to taxpayers carries a price of its own.

“It’s just a matter of how you want the government to use its power. Do you want it to bend wages down or do you want it to at least maintain wages at the level that prevail in that market? The answer, at least during the New Deal administration, was we want the government to at least maintain wages, we don’t want wages to go down,” Dau-Schmidt says.

Supporters of repeal argue those higher wages come out of taxpayers’ pockets. House Speaker Brian Bosma says studies indicate repeal would cut costs by as much as 20-percent, at a time when cities, towns and school corporations are struggling to afford construction projects within the constraints of Indiana‘s property tax caps.

Bosma says the move would make construction projects more affordable for local governments.

“Studies from around other states, many states, have shown that the cost of public projects will be reduced between 10 and 20 percent with no loss in quality. In fact, in some studies, [there is] an actual increase in quality,” Bosma says.

Although Republicans are leading the charge for repeal, the idea was originally advanced by Republicans. Kansas enacted the first prevailing wage law in 1891, and President Herbert Hoover signed the federal version in 1931. A Democratic legislature and governor in Indiana followed suit in 1935.

By 1978, 42 states had prevailing-wage laws. Since then, nine states have repealed their statutes, and a court threw out Oklahoma‘s wage law in 1995.

Democrats have argued the move, which comes at a time when Republicans control both houses of the General Assembly and the Governor’s Office, is another move to weaken unions in the state – similar to their stance on Indiana becoming a so-called “Right to Work” state.

The House will vote on the repeal this week.