Day 7: Pay Market Wage, Not Union-Imposed Prevailing Wage For Public Projects
In 2009 the New Mexico State Legislature passed SB 33, which mandates that prevailing wages be set by collective bargaining agreements.1 The law attempts to ensure that workers who are hired for public works projects are paid a prevailing wage which is equal to collectively bargained union wages. This regulation holds despite the fact that only 8.7 percent of private-sector construction workers in New Mexico are union members.2 By negating the merit system which was used by 92 percent of the construction industry, the law places wage setting power among the 8 percent who do use collective bargaining agreements.
Economically speaking, this is a form of price fixing which pushes out competitors who are willing to work for lower wages. The federal Davis-Bacon law (1931) is estimated to raise costs to taxpayers by 15 percent on federally funded projects.3 Additional legislation such as SB 33 only raises this cost, and arguably siphons money that could be used for other projects.
Resources are scarce. Adding costs to construction projects means fewer roads and schools for New Mexicans. The Legislature should repeal SB 33 and any other New Mexico law that forces taxpayers to pay a higher-than-market price for public works projects.
1http://www.abcnm.org/Public_Policy/Senate_Bill_33.aspx
2Associated Builders and Contractors, "New Mexico,: No Good Government to be Found Here," (link)
3U.S. Chamber of Commerce, "Davis-Bacon Act," http://www.uschamber.com/issues/labor/davis-bacon-act