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Trickle-down explained

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Illinois

* From the Illinois Policy Institute’s news service…

Jerry Lack, Executive Director of Illinois Construction Management Labor Counsel, says the prevailing wage laws are meant to ensure people make money.

“You gotta have good paying jobs that people can support families on. The prevailing wage helps that become a reality.”

But Billy Michaels, an out of state contractor that has done business in central Illinois, says prevailing wage and other union issues could impact his ability to keep guys from drawing unemployment.

“Where I may be willing to take a eight percent profit on a job versus having to take fifteen. I’m willing to take that eight percent to be able to get the job and keep my guys working all the time versus having them collect (unemployment). It puts an undue burden on the small business owners.”

An out of state contractor complaining about his Illinois profit margin because his workers make more money than they do wherever he’s from. Great example there, guys.

posted by Rich Miller
Monday, Feb 9, 15 @ 11:28 am

Comments

Poor Billy Michaels.

I bet an increase in the minimum wage would crush his bookstore too.

Comment by LizPhairTax Monday, Feb 9, 15 @ 11:29 am
“If we look at Kentucky…”

“If we look at Indiana…”

“If we look at Wisconsin…”

IPI, I’m looking at Illinois. Maybe you should too…unless some are too busy with their new jobs in the Rauner Administration, but I digress…

Comment by Oswego Willy Monday, Feb 9, 15 @ 11:33 am
I read his comment the opposite way. Because the alternative is unemployment, and that is more expensive to him, [and to the taxpayers], he is willing to take the “prevailing wage” job at lower profit margins. No?

Comment by walker Monday, Feb 9, 15 @ 11:35 am
Billy Michaels is a fool. Trickle up economics is obviously the way to go. Look at how much $85,000 janitors with early/generous retirement has worked so well for IL. Let’s continue with our heads in the sand and mock everyone who has to make payroll and collectively tells us IL policy is a disaster for employers.

Comment by Econ Prof Monday, Feb 9, 15 @ 11:44 am
Walker, I read Michael’s comment the same way–that his firm would take the Illinois work even with the prevailing wage requirement because lower margin Illinois work is better than his crew having less work (and thus drawing unemployment, which gets reflected in Michael’s firm’s unemploymnet tax insurance rate).

Comment by Concerned Monday, Feb 9, 15 @ 11:45 am
Most of the people I work for would love to “settle” for an 8% profit margin.

Comment by SAP Monday, Feb 9, 15 @ 11:56 am
IPI makes a great case for prevailing wage here.

Comment by Wordslinger Monday, Feb 9, 15 @ 12:00 pm
Are you kidding? I know of out-of-state contractors that love Illinois’ prevailing wage law. They don’t actually pay their employees what the wage is supposed to be, but unless someone audits the time cards or employees complain (two things that are largely unheard of), the contractor pockets the difference. That’s one reason why out of state contractors get so much business in Chicagoland.

Comment by 47th Ward Monday, Feb 9, 15 @ 12:00 pm
I’ve always thought it should be called “tinkle” down economics.

Comment by Streator Curmudgeon Monday, Feb 9, 15 @ 12:04 pm
Most jobs have not moved to Indiana, wisconsin or kentucky they moved to Mexico and China.

Comment by foster brooks Monday, Feb 9, 15 @ 12:19 pm
It’s still a valid point, and quite applicable to in-state contractors as well.

Comment by Neglected stepchild Monday, Feb 9, 15 @ 12:26 pm
OMG…are we going to have to hear more from IPI more? They’re like the Brian Williams of think tanks. How can you ever trust what they’re saying when they are one of the paid mouthpieces for Rauner and pals? Jeessh!

Comment by 2 cents... Monday, Feb 9, 15 @ 12:26 pm
I’m sorry, but if it is from the IPI it probably isn’t “news” any more than Bryan williams was fired upon in a helicopter….

Comment by ash Monday, Feb 9, 15 @ 12:30 pm
==- 2 cents… - Monday, Feb 9, 15 @ 12:26 pm:==

Brian Williams, that’s generous. I see them as Stephen Glass.

Comment by Precinct Captain Monday, Feb 9, 15 @ 12:30 pm
As a side note, on IPI’s website they have a link to a story that lists the 10 worst states with the worst taxes for average Americans. Illinois is ranked 5th worst, mainly because of the flat income tax. Funny how they would link to that story since they hate the progressive income tax.

Comment by Salty Monday, Feb 9, 15 @ 12:34 pm
47th Ward-

Largely unheard of? Happens every day. What out of state contractors get lots of work in Chicagoland and don’t pay the prevailing wage? They’re breaking the law. So let us know their names and we can report them.

Comment by chi Monday, Feb 9, 15 @ 12:37 pm
It’s obvious that many posting here have never run a business and understand UI.

Comment by Joe Schmoe Monday, Feb 9, 15 @ 12:56 pm
==But Billy Michaels, an out of state contractor that has done business in central Illinois, says prevailing wage and other union issues could impact his ability to keep guys from drawing unemployment.==

So basically his comment is “Let me pay low wages or these guys aren’t working.”

Nice.

Comment by Demoralized Monday, Feb 9, 15 @ 1:14 pm
Bill Maher made a funny comparison on trickle down economics by comparing it to giving one of your three dogs a wiener and telling him to share it with the other two…

Comment by Mouthy Monday, Feb 9, 15 @ 1:15 pm
Same Econ 101 principle of minimum wage generating unemployment (and/or underemployment) applies to prevailing wage. PW is a price floor that hurts consumers only at the benefit of the producer. It’s a price floor that unions will never stop defending, despite the reality of the damage it does.

Comment by Kizzo Monday, Feb 9, 15 @ 1:26 pm
=== - chi - Monday, Feb 9, 15 @ 12:37 pm:

47th Ward-

Largely unheard of? Happens every day. ===

I’ll second that. In our line of work, Contractors must submit certified payroll records along with their pay requests in order to collect. It’s not unusual for Department of Labor to collect these from time to time. Big trouble if those payroll records are falsified.

Comment by Birdseed Monday, Feb 9, 15 @ 1:29 pm
Kizzo, you should have gone to the second day of Econ 101

Comment by Wordslinger Monday, Feb 9, 15 @ 1:30 pm
wordslinger - google “equilibrium price floor”, go to google images. the triangle that says “surplus” or “excess supply” is unused supply (workers unemployed). minimum and prevailing wage is an emotional political issue - hardly an economic one.

Comment by kizzo Monday, Feb 9, 15 @ 1:38 pm
“Prevailing wage” doesn’t hurt the workers so much as it hurts the children and those who need public facilities maintained and built. Non-union contractors still have a big advantage over union contractors because they don’t need to live with jurisdictional rules that union contractors suffer under.

For example, I was once an owners rep for a project that had electrical work in it, but welding of supports was required. Instead of using the pipe fitter welders that were frequently available, the unions required that the welders be BOTH certified welders and a member of the electrician’s union. We needed both on site to meet schedule, so the pipe fitter welders often were twiddling their thumbs waiting for work while the electricians were doing their welding. That isn’t a problem for a non-union contractor paying prevailing wage.

The ones who are hurt are the kids in schools who have to learn in sometimes unsafe environments because a painter whose market value is $20/hr is being paid $40 while he works on schools. It’s the motorists who could have had 10 miles of road repaved at the market rate of $20/hr for paving workers when they have to pay $43/hr under “prevailing wage” and only get 6 miles resurfaced.

Politically connected contractors typically LOVE prevailing wage. A project that cost $1 million for a private sector project may cost $1.25 million at the public trough. His percentage markup will be same, so he makes an extra 25% profit as well on the taxpayers dime.

Paying more than you need to for an acceptable quality of construction is simply bad policy and bad management, which perhaps explains why it has become and time honored institution in Illinois!

Comment by Arizona Bob Monday, Feb 9, 15 @ 1:43 pm
Bob:

We can always count on you to be the guy advocating for everyone to get paid less.

Comment by Demoralized Monday, Feb 9, 15 @ 1:57 pm
Kizzo, google “Mississippi” and behold the quality of life in that economic juggernaut.

Comment by Wordslinger Monday, Feb 9, 15 @ 1:57 pm
Apologies for bringing over 100 years of settled economics to a political discussion. Let us continue on the path of Greece to please the interest groups that exploit the common good!

Comment by kizzo Monday, Feb 9, 15 @ 2:05 pm
==Apologies for bringing over 100 years of settled economics==

You might want to tell all of those economists who disagree with that “settled” part.

Comment by Demoralized Monday, Feb 9, 15 @ 2:07 pm
==Let us continue on the path of Greece==

And we’re not Greece. Not even close. I thought that dopey narrative was gone. Apparently not.

Comment by Demoralized Monday, Feb 9, 15 @ 2:07 pm
Kizzo, there are few employment effects one way or the other from the minimum wage.

http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

Like Word said, you have got to do better than spout the day one, class gets out earlier, forgot your notebook lecture.

Comment by Precinct Captain Monday, Feb 9, 15 @ 2:11 pm
Kizzo, I had no idea there was 100 years worth of peer reviewed research into the minimum wage and prevailing wage. Who did that, Nostradamus? Seeing into the future and all.

Is “Greece” the new “Detroit” among the cool kids? Can you see the cheerleaders practice from your dorm room?

Comment by Wordslinger Monday, Feb 9, 15 @ 2:18 pm
Haha its the study of an equilibrium price floor. Origins back to Leon Walras late 1800’s. Now in literally every econ textbook as a supply amd demand graph. I get that you buy into the political argument category, im just saying that the political argument can be debunked by the economic one. It’s amazing how people with so little of an unserstanding of simple market behavior have so much to say about it.

It would be easier to implement a higher EITC and damage the exonomy less. Workers would have more pay and economoy would be more productive. But hey, prevailing wage kerps interest groups happy i get it.

Comment by kizzo Monday, Feb 9, 15 @ 2:26 pm
Billy Michaels did make the point for Prevailing Wage. Most out-of-state contractors who come to Illinois to work will pay wages that are below those of IL workers. The PWA forces those contractors to compete based on the skill and efficiency of their workforce, not how far they can drive down wages and benefits (if they provide them).

Why would Bruce Rauner want to make it easier for out-of-state contractors to get work in Illinois, using Illinois tax dollars no less?

Comment by Hyperbolic Chamber Monday, Feb 9, 15 @ 2:33 pm
- Demoralized - Monday, Feb 9, 15 @ 1:57 pm:

=Bob:

We can always count on you to be the guy advocating for everyone to get paid less.=

Nope. You can always count on me to be the guy advocating for the kids and taxpayers to get MORE for their money and fairness in compensation. The amount spent will be the same if we get rid of prevailing wage. It’ll just be more fairly distributed in more workers’ pockets and result in safer schools and roads for our children and drivers. and, God forbid, maybe some tax savings for our overburdened taxpayers.

Only a “Dem” would see that as a bad thing…

Comment by Arizona Bob Monday, Feb 9, 15 @ 3:30 pm
@ Arizona Bob
Oh yes, let’s just bring the kids into the argument. Why stop there? Are you also for advocating a living wage to keep people off of public assistance? Workers are taxpayers too. Only a “RINO” would see that as a bad thing…

Comment by Ktl43 Monday, Feb 9, 15 @ 3:42 pm
@Ktl43
=Oh yes, let’s just bring the kids into the argument.=

Funny thing, Kt, school safety and kids seem to go together. Overcharging to keep their schools safe may just impact them…just a little?

=Why stop there? Are you also for advocating a living wage to keep people off of public assistance?=

I’ve got a better idea. I want people to EARN the skills to get far more than a living wage. We need labor VALUE to get our economy healthy again, not ENTITLEMENT to pay more than low skill labor is worth.

= Workers are taxpayers too.=

Ummmmm-not many of them, Kt. The top 25% of earners pay virtually all of the income taxes that keep the government running. Many “workers” pay no income taxes at all, and in fact get “negative income taxes” through EIC.

The solution here is to expect our high priced, overfunded public education system to graduate literate students ready to work, and create social stigma to dramatically reduce single parent families.

If that’s “RINO” to you, I must not understand your definition of the term.

Comment by Arizona Bob Monday, Feb 9, 15 @ 5:15 pm
“Workers are taxpayers too” Remember all the other tax payer groups chanting “Raise the taxes” in downtown Springfield? Me neither.

Comment by Econ Prof Monday, Feb 9, 15 @ 7:17 pm
Gov. Rauner is a neoliberal economics believer. If you study milton freidman you will understand the end game. Fist eliminate the voice of labor. Two, eliminate all regulations. Three, privatize for profit all state services. Four, elimintae public education and go voucher and for profit charter schools. Five, eliminate safety regulations. Six, eliminate any state trade barriers and farm subsidies. Eliminate minimum wage and prevailing wage, no floor, no protection for local workers or local contractors. the return of robber baron economics is at hand. The candidate Rauner talked about all of these ideas in the campaign. Milton would be so proud. The Koch the brothers are ecstatic.

Comment by M Freidman Tuesday, Feb 10, 15 @ 5:20 am
Arizona Bob:

Really, not many workers are taxpayers? You have really bought into that taker propaganda haven’t you? Dope.

Comment by Demoralized Tuesday, Feb 10, 15 @ 7:53 am
And Bob, why do you advocate so loudly to pay people less? You are all about protecting those rich folks but, hey, if you are middle class you make too much money. What the hell is wrong with you?

Comment by Demoralized Tuesday, Feb 10, 15 @ 7:54 am
Prevailing wage protects local contractors and area standards against predatory typically out of state contractors. RS Means, which is a national bidding tool for contractor also provides an average national bid per square foot shows that Illinois per square foot bid cost is comparable with the national average. Prevailing wage also recognizes that training is an intregal part of having professional construction workers availible for both public and private projects is in the states best interest. The average career for a union trained construction worker is 30 years. A non Union construction worker’s average career is 10 years with very little or no training. Apprenticeships in the union trades run 3-5 years with thousands of in class training coupled with ojt. If I’m going to have surgery I want a doctor with the proper training. If the state is going to spend millions to build a project I want professional highly trained workers to build the project. On time in budget and safely. Prevailing wage is a big part of insuring that result.

Comment by Living outside the bubble Wednesday, Feb 11, 15 @ 5:27 am