This article first appeared at delawareonline.com on March 27, 2015, and in the News Journal on March 28, 2015.
Normally, and from a professional point of view, I do not spend my time replying to politicians’ op-eds. They usually are full of ideological and partisan talking points without facts, data and analysis supporting them. However, as a co-author of one of the few analyses of the methodology used for the Prevailing Wage system implemented in Delaware and actually working on the possible impact of right-to-work laws on Delaware, I found my obligation to answer, with all due respect, to the opinion article written by Rep. Michael P. Mulrooney and Rep. Edward Osienski on March 19.
First and foremost, the title of the note is misleading. We at Caesar Rodney Institute’s Center for Economic Policy and Analysis conducted a comprehensive analysis of the methodology used by Delaware Department of Labor back in 2010. The opening line of the introduction states that the report does not challenge the concept of “prevailing wage,” it just focuses on the methodology used to calculate the Delaware prevailing wage rates.
Mulrooney and Osienski said, “They (Republicans) tell us the prevailing was drives up the cost of state construction and point to outlier figures to stoke the flames.” I am not sure what “outlier” figures Republicans are using but if Mulrooney and Osienski read the report indicated above and the update done with 2014 Labor Department data they will find (with strong data support) that we don’t use “outliers” but the data provided by the Labor Department.
We show that the methodology used by the Labor Department is biased and “inflates” labor costs. Mulrooney and Osienski assert that the system used by the Labor Department “… establishes the true, current construction market rates for the area.” That statement is partially true. The questionnaires sent out by the Labor Department obtain answers from 163 firms covering 5,068 construction employees. Acceptable results, but not the best. The May 2014 U.S. Occupational Employment Statistics survey for Delaware polled data from 300 unique construction firms covering 27,455 workers.
The DOL can substitute the detailed wage by construction occupation data collected annually through the U.S. Occupational Employment Statistics program. This would save the $1.5 million the DOL spends on its prevailing wage survey and reduce the prevailing wage rates by almost 40 percent on average. This, in turn, would free up nearly $63 million of spending from the States FY15 capital budget, including almost $18 million for more school capital improvements.
Meanwhile, Mulrooney and Osienski assert that “… fundamental changes or the elimination of the prevailing wage for state project will not result in savings for the state; it will result in shrunken wages for taxpaying citizens. Contractors will simply pay workers less and increase their profit margins.” I have to recognize that I couldn’t figure out the math involved in the last sentence. According to our conversations with management of construction companies, they apply a percentage of total costs as profits. If labor costs, which are part of total costs, are reduced, how a percentage applied to that total can increase?
Second, Mulrooney and Osienski jump into right-to-work laws. They refer to a 2012 from the Congressional Research Service. They indicate that there is no conclusive evidence proving that right-to-work laws spur job growth or reduce employment. This is countered by a 2014 article from the same CRS.
I agree with Mulrooney and Osienski that comparing RTW states with compulsive union states is technically difficult. That is why at CRI we are trying to analyze the difference between RTW and union states in terms of employment growth and wages in order to determine if that can make a difference in Delaware. Certainly it is clear that no major manufacturer will locate in one of the 25 remaining states that do not have labor freedom.
Regardless, from a personal point of view and as a naturalized American who has lived under military dictatorship and corrupted civilian government, I strongly believe that having the right to decide if an individual worker wants to be a member of a labor union or not is a fundamental freedom in a society. Certainly, unions would function more effectively if they had to clearly “add value” in order to attract workers.
If Mulrooney and Osienski want to compare notes, data, models, and overall research about how to calculate the PW or the possible impact of right-to-work laws, I will be more than glad to get together for a discussion. (Just pick the coffee shop of preference.)
Omar J. Borla is director of the Center for Economic Policy and Analysis for the Caesar Rodney Institute.