Why is the prevailing wage issue important to Minnesota businesses?

Prevailing wage law mandates that building trade workers bidding for tax-funded
county, state and in some rare cases, city, construction projects be paid the
“prevailing wage” within the area. The prevailing wage is defined as the most
common wage in the area. Currently, Minnesota uses the modal method (the
most costly method) to calculate the prevailing wage. Changing Minnesota's
formula to its federal counterpart will enhance competition on state financed
construction projects and thereby save taxpayers money.

Minnesota’s method of determining prevailing wage for public construction projects
is used only in one other state, California. This practice simply drives up the cost of
construction, resulting in higher taxes and reduced construction activity. Those
deriving income from the construction of public projects— labor, suppliers,
managers and others—are subsidized by income and sales taxpayers who fund
interest payments on general obligation bonds supporting these projects.

Reforming the prevailing wage law should reduce costs of other state funded
construction projects, benefiting employers along with all taxpayers. In fact, a
Minnesota Taxpayer’s Association study determined that in 2002, Minnesota
would have experienced estimated savings of $126 to $171 million, or 7.4
percent to 10 percent of total project costs if the state used the Department
of Employment and Economic Development median wage rates instead of
prevailing wage.

How should Minnesota’s prevailing wage laws be changed in order to reflect true market conditions, ensuring that taxpayers receive the greatest value for their investment?

• Prevailing wage laws and project agreement requirements inhibit competition, and we are opposed to the creation of new prevailing wage or living wage mandates at the city level. Competition among providers of construction services for government contracts should be encouraged to ensure the most economical use of scarce taxpayer resources.

• Existing prevailing wage laws should be modified to utilize the DEED survey for median wages as an alternative definition of prevailing wage for public construction projects in Minnesota.

• The provision from education funding which mandates prevailing wage contracts
for public school construction should be removed.