Construction Wage Battle Heats Up As Senate Committee Hearing Looms

Apr 7, 2015

The battle over the bill has been raging on Indiana television airwaves for weeks.
Credit Rachel Morello / StateImpact Indiana

It may not sound like music to your ears, but for James Ratican, the administrator for a construction apprenticeship and training program in Anderson, a construction site is a concert.

“It’s like an orchestra playing and everyone has to be on the right key …That’s a little bit of the music and that bass will kick in when that diesel hammer fires off," Ratican says.

The program is operated by a local chapter of the International Union of Operating Engineers. On this day, students are learning how to operate cranes and pile drivers.

“You can look around here and see there is 100 ways to die out here. You’ve got to take care of your men so safety is the cornerstone," Ratican says.

The students in this program are receiving their education for free. The funding comes from the union’s members, who pay a portion of their wages to train the next generation of laborers.

Ratican fears that these union apprentice programs could soon be in jeopardy because of a bill in the Indiana General Assembly. House Bill 1019 would eliminate the state’s common construction wage. That wage is an hourly rate that must be paid to laborers on publicly financed construction projects.  

Rep. Jerry Torr (R-Carmel), who authored the bill, says this wage is costing taxpayers.

“A few years ago we passed the property tax cap; local governments are being squeezed a bit. This is just trying to give them another tool to help save some money," Torr says.

Before a public entity can open a project for bidding, a five-member committee must decide the wage. They use industry data to determine what the standard pay for that work would typically be.

But critics of the law, including Torr, say it favors the union labor wages – which are typically higher than what nonunion firms pay.   

“And that costs taxpayers more money than if we had free market competition," he says.

Torr says this artificial wage hinders what is supposed to be a competitive process that lowers bid prices. He points to Ohio where in 1997 the state exempted its public schools from paying a prevailing wage. An Ohio Legislative Service Commission study in 2002 found that the state saved more than $480 million – or about 10-percent – after eliminating the wage.

Doctor John Crawford is the president of the Fort Wayne City Council. He says that savings of 10-percent could mean more or bigger projects for the city.

“I need freedom to make the money that I do have available go as far as I can for the citizens of Fort Wayne. So, I don’t like to be restricted from using the free market," Crawford says.

But Fort Wayne Community School Board President Mark Giaquinta says prices drop when you have more bidders at the table. Eliminating the common construction wage will just drive them to the private market where bidders are more willing to pay more.

“When you bid for construction work you want to do all you can to attract them to your work and you want to avoid those things that drives them away," Giaquinta says.

State law requires public entities to take the quote lowest responsive and responsible bid. Giaquinta says this forces them to always select the lowest bid or face a potential lawsuit. He says if you are going to eliminate the common construction wage, which favors unions, then you have to also get rid of the low bid requirement, which favors non-unions.

“Get rid of both so we can protect the taxpayers by picking the company who is best suited to do the work without regard to their bid price," Giaquinta says.

Peter Philips is a senior labor economist who recently released an economic impact report on Indiana’s common construction wage. He says the biggest cost of eliminating the wage will come in a reduction of labor productivity, construction quality and worker’s pay.

“The punchline of essentially two decades of research is that that kind of regulation keeps the construction industry healthy, it keeps the labor force trained and qualified," he says.

Philips found that 94-percent of Indiana’s annual investments in apprenticeship programs come from union chapters. He says that because 25-percent of the bidding contract pays for labor costs, cutting 10 to 20 percent off of public projects will come at their expense.

“The real question becomes which is better: to develop a local labor force on public works that are skilled and productive and capable of taking on work across the full range of public or private construction or go down the unskilled laborer approach, risking lower wages for people in your community," Phillips says.

Back at the Local 103 training site in Anderson, administrator James Ratican realizes without the common construction wage, his program is at risk.

“As far as trimming the fat, the fuel costs the same in these machines, the material costs the same, so where are you going to trim it? Probably from the labor budget. If the wages go down they go down not just for us, but for every working man," he says.

The bill passed the House by a vote of 55-41. It is currently awaiting a vote in the Senate Tax and Fiscal Policy Committee.