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An economist rides to the rescue on the Prevailing Wage law

Over at First State Politics, Dave Burris has been taking a beating from the usual suspects about his stand against the Prevailing Wage law in Delaware.

It's therefore intriguing to see that in the Sunday Snooze Journal Dave gets some back-up from Dr. Eleanor Craig, a well-regarded economist who formerly chaired the Delaware Economic and Financial Advisory Council.

Dr. Craig explains why, among other things, Delaware's lack of a right to work law and its prevailing wage law provides a huge disincentive for manufacturing jobs to come to the First State:

Delaware's prevailing wage law mandates union wages on all government contracts, increasing labor costs by 20 percent. Since half of the construction costs of buildings such as schools is labor, this adds 10 percent to all government contracts, increasing the cost of the same government services in Delaware, when compared with other states without prevailing wages.

Other state law differences are significant.

Delaware's personal income taxes are the third highest of any state, when measured on a per capita basis, and 32 percent higher than those in the average state.


Now before anybody jumps me--yes, Dr Craig is comparing Delaware to Mississippi, and I don't want to make Delaware into Mississippi for a whole lot of reasons (many of which include mosquitos large enough to show up on air traffic control radar), but....

As Dr Craig notes:

Delaware's economic health is being threatened by government actions which make other states, like Mississippi, the preferred choice for both new and old business.

The Philadelphia Federal Reserve Bank compares the health of all 50 states with an indicator model.

For the past year, ending November 2007, Delaware was ranked with the 10 states with the poorest growth prospects for income and employment, and Mississippi ranked in the 10 states with the highest potential for economic growth.

In fact, Delaware's employment growth in 2007 was one- quarter that of the U.S. and our personal income growth was three quarters as high as that in the average state.

For comparable measures, the State of Delaware also significantly lagged the other states in our region -- Maryland, New Jersey, New York and Pennsylvania.


There are elitists among us who pontificate daily about their sensitivity to the working poor:

The people receiving this prevailing wage are buying homes and shopping at establishments operated by your Chamber of Commerce friends. Be careful what you wish for.

I am happy to pay an additional 14-19% on county building projects to support this good policy. I sleep better knowing the guy hauling shingles can feed and take care of his kids.


And another:

God bless the American electricians, masons, steelworkers, and carpenters, and drywallers, and helpers! Let’s not begrudge these hard laboring salt of the earth folks a little slice of the great big subsidy pie.


And my personal favorite:

Boy oh boy. You really do have contempt for people who have to work for a living, don’t you?


But the grim reality is that you can't have it both ways.

You can't simultaneously insist on fixing wages at an arbitrary level and keeping jobs in the State.

You can't simultaneously applaud the prevailing wage law and then turn around and sock those people with the third-highest State income tax in the country and claim you're the worker's friend.

All the prevailing wage laws that the General Assembly can pass won't matter worth a damn if nobody is willing to come to the State and pay those wages. That's why Wal-Mart finds people lining up for $10/hour jobs in Delaware.

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