Minnesota Lawyer
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Citing findings from the study, the Associated Builders and Contractors of Minnesota and North Dakota says the wage requirements are adding 10 percent or more to the cost of construction in outstate areas because of a quirk in how the state calculates the prevailing wage rate.
ABC has long been critical of how Minnesota comes up with its prevailing wage, a minimum wage for construction workers on state-funded projects. The industry group has pushed for changes in the law for years.
But not everyone wants to tinker with the system. Unions have steadfastly opposed changes in prevailing wages, saying such efforts are just an attempt to put less money in the pockets of workers.
Harry Melander, president of the Minnesota State Building & Construction Trades Council, says the ABC study offers nothing new.
“This is just a different way to package the same old product,” Melander said.
ABC is working with a couple of authors on state legislation that would change the way the prevailing wage is calculated. Phil Raines, vice president of public affairs for ABC-Minnesota and North Dakota, said he’s not at liberty to mention the potential authors by name at this point.
Matt Swenson, Gov. Mark Dayton’s spokesman, said Wednesday the governor “believes that any changes to the prevailing wage must earn the support of both the labor and business communities. Unless this proposal meets that standard, the governor would not support it.”
The ABC-commissioned study, conducted by the Minnesota Center for Fiscal Excellence (formerly the Minnesota Taxpayers Association), compares the average wages for construction workers throughout the state with the prevailing wage, which is the most common wage in a given area.
In about 19 percent of the comparisons in the seven-county metro area, the prevailing wage rate was at least 20 percent higher than the average wage, the study said. In Greater Minnesota, the prevailing wage was at least 20 percent higher in 55 percent of the cases.
Labor typically accounts for half of a project’s cost, so the 20 percent increase translates to 10 percent higher total project costs, Raines said.
Raines noted that the state is struggling to find money for transportation and other projects. And the Minnesota Chamber of Commerce — a partner in the study — has said it would oppose new revenue for transportation without first finding ways to cut costs.
“A lot of people, including the governor, have said we need to find efficiencies,” Raines said. “This is an obvious one. You are going to get the same workers, same place, same road to build, but for 10 percent lower cost.”
The Minnesota Chamber of Commerce is reviewing the report, chamber communications director Jim Pumarlo said in an email.
“The chamber has had a longstanding policy to reform the way the prevailing wage is calculated in Minnesota,” he said. “We thought it would be valuable to have additional background on wage calculations across the state. This is a technical issue and the report will help inform our thinking about possible pathways to reforming how the law is calculated.”
The intent of the existing prevailing wage law is to ensure that local workers get fair wages on publicly funded projects. Specifically, workers are required to be paid wages similar to what a typical worker makes for a specific job in a specific location.
Each year, the Minnesota Department of Labor and Industry certifies the “most commonly paid” rates for comparable work after conducting a review of “contractors, labor organizations, and interested parties statewide,” James Honerman, the department’s communications director, said in an email.
State law “requires each certified wage rate be based on the actual wage rates paid to the largest number of workers within each labor classification reported in the statewide survey,” he added.
The department’s website publishes the rates by county for commercial and highway/heavy projects.
For example, the basic commercial prevailing wage rate for a laborer in Aitkin County is $24.90, not including fringe benefits. In Hennepin County, the rate for the same work is $29.90.
The ABC study used the Minnesota Department of Employment and Economic Development’s Occupational Employment Statistics survey to come up with the average pay rates.
When comparing those numbers with the prevailing wage rate, the study found some big differences.
For example, the prevailing wage for cement masons in northwestern Minnesota is 52.4 percent higher than the average rate, and the prevailing wage for ironworkers in the southeastern part of the state is 87 percent higher, the study says. ABC wants the state to set the prevailing rate based on the average pay rate for workers.
Additional costs and complexities associated with public construction projects are driving some contractors to stick with private work, which means less vigorous bidding on public jobs, Raines said.
In 2011, ABC-backed legislation that would change the prevailing wage calculation method in Greater Minnesota got through the Senate but died in conference committee.
ABC hopes to get more bipartisan support this time around. “We want to make sure our proposal is something everyone can be on board with before we roll it out,” Raines said.
With pushback from the unions, that’s likely to be an uphill battle.
Melander said the current method of calculating the prevailing wage works just fine.
“We think the way it’s been done since the 1970s works well because it accurately reflects what is happening in the industry,” Melander said. “And why would we lower construction workers’ wages? We think prevailing wage works the way it was originally intended and we will continue to advocate for Minnesota workers that are part of our community and those that are not.”
