Once again Prevailing Wage Law advocates are trying to squeeze Merit Shop contractors by promoting “Hire Michigan First” legislation. In a committee hearing held last month, ABC of Michigan was the only association to publicly provide testimony opposing the program with its supposed goal of promoting the hiring of Michigan construction workers. In reality, the legislation stipulates that contractors must make sure 100 percent of their employees have been Michigan residents for at least one year. The legislation as proposed only applies to construction firms who are not “party to collective bargaining agreements.” It is being pushed and supported by nearly every construction trades union and labor organization in Michigan.
In opposing this anti Merit Shop bill that unions exempted themselves from, ABC of Michigan’s President Chris Fisher attacked the measure as “inequitable” and for creating and “uneven playing field.” In exposing the true intent of the measure Fisher concluded, “This has nothing to do with ‘Hire Michigan First’. What this really calls for is to hire union first from any state, and hire Michigan second.”
Another provision that was described by ABC of Michigan as “untenable, unpractical and over-reaching” was a section tied to the “Hire Michigan First” charade. It stipulates that any contractor or subcontractor found to be in violation Michigan’s Prevailing Wage law faces the following:
The contractor shall not receive any further payments under the contract.
The contractor may be held financial liable for costs incurred to rebid the contract.
The contractor may face debarment form participating in future bidding opportunities.
The contractor may be required to return any payments already received under the contract. Fisher outlined significant and serious flaws with the legislation by pointing out that the bill could actually result in a reputable contractor ending up in violation of the prevailing wage act due to a technical error.
Fisher forcefully argued that it would be unjust for a construction firm to be disbarred from future state funded construction projects, subjected to stopped payments, financially liable for rebidding the contract and then forced to return all payments received for the contract even if the project is nearly completed. For example, an isolated incident resulting from a human resources glitch results in an employee being misclassified and hence underpaid 30 cents an hour for five or six hours. Under this legislation, Fisher emphasized, a contractor could be found in violation even though the technical infringement is found and then corrected.
ABC will work with legislative leaders in both the House and Senate to lead the fight against these anti-merit shop bills in order to protect the rights and freedoms of our members and to ensure the future of our industry.
In June, 2007, as agreement on the Michigan Business Tax (MBT) was being finalized, ABC of Michigan engaged in an intensive lobbying effort with the help of ABC members throughout the state. Members sent over 1000 emails to leaders of the House, Senate and the Governor to successfully avoid an unfair and cascading tax burden for the construction industry. This effort stopped what would have resulted in double and triple taxation for construction firms, and it paid off when bipartisan agreement was reached to allow contractors and subcontractors to deduct the cost of labor and materials (supplies, inventory, etc.) from their gross receipts liability.
Although it was the intent of the legislature to allow for contractors and subcontractors to take this deduction from gross receipts, over time a question has arisen as to if the MBT language as enacted actually provides for the deduction of labor and materials. Now, officials in the Department Treasury are suggesting that the new tax law is limited to only those instances where materials are purchased as part of a subcontract.
Without a decisive solution to this problem that reflects the original intent of the legislature, which was to allow for the deduction of directly purchased materials, construction companies may experience a significant and detrimental cost of doing business in Michigan. This could result in a 600 percent or greater increase of a company’s Michigan Business Tax liability compared to what their Single Business Tax liability was prior to any changes in the law last year.
To correct this serious concern, ABC of Michigan has consulted members, CPAs and other business groups including Michigan Association of Homebuilders, MITA and the American Subcontractors Association. We are prepared to testified in front of legislative committees, are meeting with ranking lawmakers, forming coalitions, distributing memos and position papers and working tirelessly to advocate for a fair and equitable business tax replacement.
Additionally ABC had successful meetings with Rep. Steve Beida, chair of the House Tax Policy Committee and Sen. Nancy Cassis, chair of the Senate Finance Committee to correct this flaw with the MBT. ABC is working hard to make sure the application of the MBT accurately reflects the intent of the legislature to allow contractors and subcontractors to deduct the direct purchase of inventory, materials and supplies from their gross receipts liability.
Associated Builders and Contractors of Michigan called on the Governor and lawmakers to create even more construction jobs than the 28,000 promised by Governor Granholm’s Economic Stimulus Package by eliminating the state’s outdated prevailing wage requirement.
“While ABC greatly appreciates the Governor’s focus on construction jobs, in this economy especially, it’s important that we are doing all we can to stimulate and promote job growth,” said ABC president Chris Fisher. “Removing prevailing wage mandates from the Governor’s stimulus package alone would free up an additional $100 million that could be used for additional construction projects to improve Michigan while over 1000 well paid construction jobs across our state.
Michigan’s Prevailing wage law increases overall construction costs at least ten percent by dictating that wages and other benefits on all taxpayer-supported construction projects must be determined exclusively by labor unions even though 78 percent of Michigan's construction work force chooses against belonging to a labor union. 'Prevailing wage' does not mean a fair market wage, but one artificially inflated by 40 to 60 percent and arbitrarily determined by an ever-shrinking minority of the construction work force. ABC instead supports competitive wages that are neither artificially high nor low.
“The fact of the matter is that our state is wasting taxpayer dollars and turning its backs on jobs by recklessly paying wage mandates which take the average competitive construction wage in Michigan and artificially inflates it beyond what the market can handle and what the state can afford,” said Fisher. “Eliminating this provision like other states have done would instantly create thousands of new, good paying jobs that on average pay more than $20 per hour.”
In the past year newspapers across the state have been critical of prevailing wage laws including the Detroit News, Lansing State Journal and Grand Rapids Press. Legislation to repeal prevailing wage on school construction has been introduced in the state House by Reps. Dave Hildebrandt, R-Lowell, and Arlan Meekhof, R-West Olive. In the state Senate, Sen. Nancy Cassis, R-Novi, wants to suspend prevailing wages for all state construction whenever state unemployment is higher than the national average.
“As the Governor continues her pledge to go anywhere and do anything to bring jobs to Michigan, ABC encourages quick action to promote this much needed reform that will bring jobs and investment to our state at a time it’s needed more than ever,” Fisher concluded.
Western Michigan ABC President and CEO John Doherty testified before the Michigan Senate Appropriations Subcommittee on Community Colleges during a special committee meeting recently held in Grand Rapids. Doherty’s testimony focused on community college and ABC partnerships that promote apprenticeship training, continuing education, safety and first aid/CPR, applied technology and most recently “green building”.
As the baby boom generation retires, Doherty discussed the need for the construction industry to produce the best craft persons, managers and entrepreneurs, and that to do so we must lean heavily on Michigan's educational resources.
During his remarks Doherty stated that in order to enable ABC member companies and their employees to survive in today’s business climate, “we need to have training partners that understand the marketplace we work in; provide educational opportunities that match industry needs and can be delivered at the speed of change. They need to have people that will anticipate what we need often even before we know ourselves.”
Referring to the community college system he noted that the industry often accesses educational resources on behalf of ABC member employers. The community college system is essential to the training of the next generation of construction industry employees, and Doherty laid out several trends affecting construction industry dynamics. He went on to highlight needed reforms to better enable ABC members to excel in today’s construction marketplace.
Doherty concluded that, “we are either going to stay ‘state of the art’ or slip into irrelevancy. Workforce development is critical for any of the skilled trades and applied technologies that are essential for employers to produce buildings or products that fuel our state’s desired economic growth. A trained workforce is essential for us to gain any kind of an edge against competing states or nations.”
The Western Michigan Chapter of ABC has collaborated efforts with Grand Rapids Community College, Kalamazoo Valley Community College, Northwestern Michigan College and the M-TEC @ Kirtland. The chapter currently has 425 students engaged in formal apprenticeship training in five trades primarily electrician; numerous in safety and first aid/CPR courses and over 110 studying to become LEED Accredited Professionals to translate green building principles into construction practices.