Last month, the Phoenix City Council passed what the Goldwater Institute is calling a “burdensome, illegal prevailing wage” ordinance. As a result, and on behalf of dozens of Arizona businesses, the Goldwater Institute sent the council a letter demanding it repeal the ordinance.
Critics of the ordinance say it restricts qualified businesses from competing for taxpayer-funded public-works projects while hurting small businesses, minorities, younger workers, and all taxpayers.
The ordinance also includes regulations that come with the risk of substantial fines and have the potential to prompt lawsuits, even for minor infractions.
According to the Goldwater Institute, the new “Prevailing Wage Ordinance for City Projects” law, introduced on short notice with almost no chance for public scrutiny from anyone it will impact, requires businesses that contract with the city for construction projects costing more than $250,000 to follow a slew of new requirements: they must provide their employees with wages and benefits based on complicated formulas produced by the federal government, they must keep painstaking records, and they must comply with a host of other rules and regulations.
The mandate also requires contractors to ensure certain percentages of their employees come from “apprenticeship” programs, which Goldwater argues are “notoriously used as union recruitment programs – and even to provide financial support to union-sponsored apprenticeship programs or trade schools.”
Goldwater believes the ordinance would have many detrimental effects, causing businesses and their employees to miss out on opportunities, while forcing taxpayers to pay more and wait longer for public projects to get completed.
In a letter to the council sent on behalf of the Associated Minority Contractors of Arizona and Arizona Builders Alliance—which together represent dozens of businesses—Goldwater points out that the ordinance isn’t just bad policy; it’s illegal. In particular, it violates a voter-approved state statute, A.R.S. § 34-321, that prohibits cities from doing precisely what Phoenix did: imposing “prevailing wage” requirements on public works contractors.
Research shows that “prevailing wage” laws like this ordinance disproportionately hurt small businesses, minorities, and younger workers by cutting into these businesses’ already-thin margins and making it cost-prohibitive for them to hire entry-level employees. In fact, as far back as the 1930s, governments have enacted these types of mandates to keep non-unionized black and immigrant workers from working on government-funded construction projects.