Testimony on HB 2557

Steve BucksteinBefore the House Business and Labor Committee

on certain exemptions from prevailing wage laws

Good afternoon Chair Schaufler and members of the Committee. My name is Steve Buckstein. I’m Senior Policy Analyst and founder of Cascade Policy Institute, a public policy research organization based in Portland.

I’m here to express my support for exempting certain projects from Oregon’s prevailing wage laws. Let me briefly tell you why.

Supporters of prevailing wage laws claim that they provide higher incomes and increase a region’s standard of living.

My question is this: Where do these higher incomes and better standard of living come from? There isn’t any free lunch in the economy. Every dollar paid above market wages is a dollar that can’t be spent or saved somewhere else.

The economic literature tells us that every public project has what are called “seen” benefits. We can see the building, and we can see the wages paid to build it. But every project also has “unseen” costs. What wasn’t built, or what spending or investment didn’t happen because the government preempted those choices?

The literature is clear that those “unseen” costs” usually outweigh the “seen” benefits. That’s often the case because there are simply too many variables for any group of government experts to make better economic decisions, overall, than people who are investing their own money.

Of course, supporters won’t admit that the prevailing wage is above the market wage in the first place. In fact, Oregon State Building Trades Council Executive Director Bob Shiprack told the Portland Development Commission last October that the prevailing wage is really the market wage in any given community. Well, if Mr. Shiprack’s statement is correct, then this hearing is unnecessary and we can all go home. Clearly, everyone knows that the prevailing wage is above the market wage; that’s why this bill is trying to exempt certain projects, so more of them can be built.

Pay less for labor on affordable housing units, for example, and you end up building more affordable housing units than you otherwise could. You may want to maximize wages, and maximize the number of housing units you can build, but you simply can’t achieve both those goals at the same time.

Finally, because the prevailing wage is above the market rate, you run the very real risk of pricing younger, lower-skilled and minority workers out of jobs. Such discrimination, coupled with the fact that you can build fewer projects, argue forcefully for exempting the types of projects set out in this bill from the prevailing wage laws.

Thank you for the opportunity to testify before you today. I’ll be glad to answer any questions.

Listen to the entire hearing. My testimony, including questions and lack of answers from legislators, begins at 01:07 into the hearing.

Economic Literature:

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