GARY — Indiana University Northwest started construction this summer on a three-story, 126,300-square-foot Arts and Sciences building with a 500-seat performing arts center and a black box theater.
The $45 million building, to be shared with Ivy Tech Community College, was one of the last major publicly funded construction projects in Northwest Indiana built under a long-standing system in which a local panel set minimum wages for construction workers doing taxpayer-financed work.
The 80-year-old system, which the Indiana General Assembly repealed this year, had been in place to ensure construction wages were in line with the local market, said Dewey Pearman, executive director of Construction Advancement Foundation.
It also kept governments from having the power to inflate or depress the wages, he said.
Common or prevailing construction wages went away July 1, and it's expected to have a big impact on Northwest Indiana — where more than 500 contractors operate and more than 50,000 skilled union tradespeople work on commercial, industrial and road projects. Government projects currently account for 10 percent to 15 percent of the overall construction market.
Supporters of the common construction wage repeal say it will lower costs for taxpayers by as much as 20 percent. Both contractors and union tradespeople opposed the change, arguing it would deprive locals of jobs, cut income and drive local contractors out of business. They fear an influx of out-of-state contractors who will cut corners and bring in itinerant, low-wage workers who will contribute little to the local economy while eating baloney sandwiches in cheap motel rooms.
Nearly six months into it, that hasn't happened yet in Northwest Indiana. Governments have continued to hire union contractors for construction projects, Pearman said. A slew of local governments, including Portage, Hobart, Lake County, Valparaiso schools and Portage Township responded to the repeal by adopting "responsible bidder" ordinances or policies designed to keep out fly-by-night contractors.
They could for instance reject contractors with bad track records of OSHA violations, or do not have bonafide training and apprenticeship programs.
Valparaiso Community Schools Superintendent E. Ric Frataccia said the district put safeguards in place before embarking on $148 million in construction projects that include a new elementary school and renovations or expansions of existing schools. He said the district had to ensure the highest possible standards after the community passed a referendum.
"If you do it right the first time, you don't have to go back and fix it," he said. "Our criteria is to have contractors of the highest caliber. Frankly, the kids deserve it, and the community deserves it."
The district received 30 bids for the new elementary school, and most were from the local area and only one was nonresponsive, Frataccia said.
The impact of the common construction wage repeal will be felt in other parts of the state long before it is in more union-friendly Northwest Indiana, where unionism is ingrained in the culture, Pearman said.
"The consequences of the common wage repeal will be felt more slowly here than in other parts of the state since this is a union stronghold," he said. "It will take a little longer, a few years, for nonunion contractors to establish a foothold. Public agencies are accustomed to working with union contractors here. They have a relationship. They know their abilities and their experience and the quality of their product."
But out-of-state nonunion contractors may be able to make inroads elsewhere across the state as the construction season heats up in the spring, Pearman said. The full impact statewide should start to be seen this year. The Indiana Building Contractors Alliance and other industry groups plan to start tracking data for the impact on local incomes, and the local businesses where that money is often spent.
"It will be hard to convince the legislature, but we'll have convincing data to back the dire predictions we made during the repeal debate about how this will force down family incomes and transfer wages out of state," he said. "They fought a battle to repeal common construction wages for 50 years. We hope it doesn't take another 50 years to turn that around, but it's going to be a hard-fought battle that will take many years."
Local governments are likely to continue to hire union contractors who will pay decent wages while the lobbying effort is underway, said Northwest Indiana Federation of Labor President Dan Murchek. Local officials understand how union tradespeople do quality work and how crucial their quality wages are to the local economy, he said.
"It will take longer to reach here because of the union density in Lake and Porter counties," Murchek said. "Folks up here know the value of hiring a union, of quality workmanship from trained craftsman. There's the safety aspect, doing it on time and coming in on budget. It's a bad law that brings down the middle class and only really serves to make a small group richer. It just makes profits higher, and takes away from the average worker."
The repeal will suck money out of local communities and won't end up saving taxpayers money because the contractors that undercut established union contractors by paying lower wages will bid just low enough to secure the contract and pocket the rest as profit, said Randy Palmateer, business manager for the Northwestern Indiana Building and Construction Trades Council.
Contractors believe taxpayers will be on the hook for more over the long term, since shoddy construction will require more repair and maintenance.
"I would implore the state to rescind the repeal law," he said. "It's costing taxpayers money and hurting local economies, contractors and working Hoosiers."