Prevailing Wage Laws: The Road to Higher taxes

Acting Governor Richard Codey signed his first bill, A-3890, not surprisingly guaranteeing even higher taxes and more debt for the already struggling State of New Jersey. This costly piece of legislation requires the taxpayers fund “prevailing wages” for all work performed by contractors on state owned property. This includes privately run hospitals and other facilities that lease state property. The move is designed to further reward the organize labor bosses that have supported the Corzine-Codey agenda.

Assemblymen Joe Doria (D – Bayonne), said “We cannot abide such glaring loopholes which allow for private interests to make a profit off the backs of our state’s skilled craftsmen and laborers.” This radical statement begs the question: just when and how will that “greedy” private sector be allowed to make a profit?

Profits serve the crucial economic function of directing production. When businesses can make profits in a state, they will tend to increase operations there. When they can’t make profits in a state, they will, likewise, reduce operations. Obviously, more business activity is good for the state’s citizens€”it means more jobs and more competition.

Trenton politicians have not learned this lesson. New Jersey is one of the nation’s worst state to do business and boasts the third highest corporate income tax. The result is predictable. Industries traditionally strong in New Jersey are deteriorating. New Jersey was home to 20% of all pharmaceutical jobs in the nation in 1990 versus just 13% today. Total private sector employment figures show a decrease of 7,900 jobs between 2000 and 2005 and additionally, by 2005, almost 57,000 more people left New Jersey for the rest of the country than moved in, more than double the out migration of three years earlier.

If profits are reserved only for those, like Assemblyman Doria, who benefit from the states lucrative pension system, paid for on the backs of our over-burdened taxpayers, then how will our capitalist economy survive? This is a true “pay to play” payoff that highlights the utter failure of election regulations to limit influence of special interests on campaigns. By delivering contributions and votes, union leaders have secured the most advanced socialist regulations in the country, further undermining New Jersey’s competitive advantage in a global economy.

The Codey maneuver expands McGreevey’s Executive Order #1 and subsequent legislation implementing Project Labor Agreements. This move destroyed the ability of “Merit Shops” to compete for improvement projects on the local, county and state level. Non-union shops are required to pay the “so-called “prevailing wage” for any such project, artificially increasing their employee’s salaries for the duration of these projects. Free market pressure in the private sector means returning to realistic wages the rest of the time, but this causes difficulties as employees become used to unrealistically high salaries.

Communities seeking bids on construction projects have experienced an average of 30% increase in cost. Much of this increase is funded by long-term debt. The impact is compounded by interest on the debt and has effectively deferred the principle cost of the Corzine-Codey-McGreevey organized labor payoff to the next generation. But we’re paying the interest now.

The proposed FY 2008 Budget sets aside $2.6 billion dollars for debt service alone. But don’t assume that this chunk of taxpayer money is being used to bring the debt under control; New Jersey has the fastest growing debt in the nation, which has pushed its per-capita debt to the 2nd highest in the country. As the debt continues to increase, the interest payments will continue to increase. This will lead to the further deterioration of the state’s finances and will propagate a wealth transfer from taxpayers to bondholders.

Effectively, New Jersey is only making the minimum payment on its “credit cards” while continuing to make large purchases. Except when a private citizen does this, he does it with his own money. The government gets to do it with other people’s money. The question is how much longer people will tolerate this.

Prevailing Wage Laws: The Road to Higher taxes