Yesterday morning as I was driving to a sales call I almost drove off the road as I heard Deval Patrick tell Margery Eagan that he is against “no-bid contracts.” Of course he was talking about slot machines for race tracks. He considers, rightfully so, the two racinos as no bid contracts. What makes that so funny is that he not only believes in but promotes no-bid wages for union members.
First the no bid wages. How does that work? Massachusetts like other states has a prevailing wage law. Unlike other states however, the Commonwealth lets unions set their own pay rates with no negotiation or bidding.
There is not one prevailing wage, but three. There is the wage that actually prevails in a particular trade – that is, the average wage paid to all workers, union and nonunion alike. Then there is the prevailing wage that the federal government calculates, using methods that are weighted toward the union wage. And then there is the state prevailing wage, which, in Massachusetts, is simply the union wage. This wage is generally the highest of the three. And it’s the wage that Massachusetts construction workers get on public works projects.
It is important to note that the federal prevailing wage is adjusted for each metropolitan statistical area. For instance the federal prevailing wage for a particular job is higher in Boston than it is in say Des Moines. The federal prevailing wage takes into account regional costs of living. What do these no bid wages mean for Massachusetts? Much higher construction costs.
The state prevailing wage law is a boon to both union contractors and the union trades. The contractors don’t have to compete on labor costs. They just pass those costs on to the hapless taxpayer. And the unions are happy because the contactors are willing to pay whatever the unions demand. In effect, the state serves as the enforcement arm of the union monopoly from which it is compelled to buy construction services.
How much does this cozy arrangement cost? At the Beacon Hill Institute, we computed the three prevailing wages for a group of nine construction trades in the Boston area. For the nine trades, the average wage for all workers is $27.09 per hour. The federal prevailing wage is $37.45, and the state prevailing wage $58.84. Thus union workers on Massachusetts public-works projects make more than double what construction workers in the state make on average.
How much would state construction costs fall if we repealed the state prevailing wage? The Beacon Hill Institute estimates that the cost savings would have been $177 million in fiscal 2008 – during which the state spent about $1 billion on public works projects. The legislation that paved the way for civilian flaggers authorizes $3.5 billion in new spending on road and bridge projects. Repeal of the state prevailing wage would cut this cost by more than $600 million.
Deval Patrick is against no-bid contracts unless they are for the wages of his allies.